Investcorp positive about US growth under Trump but warns of inflation risk

Investcorp, the biggest alternative asset manager in the Middle East, is optimistic about US growth during Donald Trump’s second stint in the White House and improving prospects for investments across regions, but geopolitics and inflation could derail investment momentum, its executive chairman has said.

“I believe it's a great moment and we are optimistic,” Mohammed Alardhi told The National in an interview on the sidelines of the World Economic Forum in Davos. “The American economy continues to be strong and I think it will do much better in 2025.”

The investment environment has improved in the past two years, with better market activity, private equity investments rising, initial public offerings bouncing back and the chances of a global recession sharply dropping from 70 per cent to 30 per cent.

“Since President Trump won, [and] even before the inauguration, we started to see the positiveness actually reflecting in the market. There are more activities, there is more confidence with investors,” Mr Alardhi said.

Risks remain

It is however, not all rosy for investment prospects. Challenges remain, including geopolitics amid the continuing Ukraine-Russia war and sticky inflation that has forced central banks around the globe to increase interest rates.

“I think geopolitics continues to be a big risk, for sure, because there are still a lot of flashpoints around the world,” he said. “If inflation [turns] 180 degrees and starts coming back again because of different dynamics, [then] that can be a really big risk.”

Some of Mr Trump's policy priorities, including imposing sweeping tariffs, also present challenges and could disrupt global trade flows, which in turn could dampen investment momentum.

“Will tariffs go [up] like the President Trump has spoken about them? If they do, then there are ramifications with that,” Mr Alardhi said.

The issue of migration and deportations from the US is also concerning as migrant workers add to the productivity of American companies, he said. “We have companies that have migrants working in them.”

On Monday, Mr Trump refrained from using executive orders to impose higher tariffs on imported goods, although he said during his inaugural address that he will be asking federal agencies to scrutinise current US trade policies and its relations with the rest of the world including China, Canada and Mexico.

The broader view of the market, Mr Alardhi said, is that “President Trump and his administration is going to look at the market and see what works and what doesn't work because at the end, they really are pro-growth”.

“They don't want too many regulations, they don't want bureaucracy, and they want to have a good, efficient and attractive tax system. So, all in all, we are optimistic,” he added.

Palestine, Lebanon and Syria reconstruction

Investcorp, which counts Abu Dhabi’s Mubadala Investment Company among its shareholders, is known for its shareholding in Tiffany & Co and Gucci during its early years of investing. It has grown to become a global investment powerhouse and has raised funds from global financiers to invest across sectors and countries.

Mr Alardhi sees opportunities for the private sector to get involved in the reconstruction of Palestine and Lebanon after 15 months of war with Israel that destroyed infrastructure in Gaza and affected large parts of neighbouring Lebanon. The ousting of Bashar Al Assad’s regime has also opened Syria up to the private sector, which could help the rebuilding process.

“They need infrastructure, and they need health care and education. Those three countries are … great opportunities,” he said.

Pooling the resources of institutions such as the Islamic infrastructure bank, as well as the Arab Development Fund, with private capital can ensure that the infrastructure being built will position these countries for growth.

Gaza needs housing, road infrastructure, ports and airports and its reconstruction alone will require up to $50 billion over the next decade, according to analysts. About 46,900 people have been killed in the Israeli bombings, with more than twice that number injured, according to Gaza's health authorities. Most of the Palestinian enclave's 2.3 million people have been displaced and vast built-up areas have been reduced to rubble.

“Governments obviously, all over the region, need to take the lead in this, but I think public-private partnership in this is a great opportunity,” Mr Alardhi said. The involvement of governments in the PPP deals will ensure de-risking for the private sector and will also help projects run efficiently and make them commercially viable. “I think the private sector is a lot more set for that kind of thing,” he added.

$100 billion asset target

Established in 1982, Investcorp invests across different asset classes through its six business lines: private equity, real estate, absolute return investments, infrastructure, credit management and strategic capital.

The company, which maintained a brisk pace of acquisitions through the Covid-19 pandemic, has continued its aggressive portfolio expansion since. Its assets under management have grown to $55 billion and it aims to boost it to $100 billion by investing in areas including the Americas, Europe, and the broader Asia region, including the Middle East.

Last year, Investcorp reorganised its business verticals and made top-management changes to ensure profitability and growth. It is now present in the right markets, invests in the right asset classes and has streamlined its strategy to eliminate silos from all its businesses, Mr Alardhi said.

“By the end of this year, we should be just north of $60 billion [in AUMs],” he said, adding that growth is not going to be “as steep as we did in the last 10 years”, but it will continue to maintain a pace where it can be efficient and rewarding for all shareholders.

Transforming Gulf capital markets

Capital markets in the UAE, the Arab world’s second largest economy, as well as in the broader six-member economic bloc of the GCC have grown rapidly over the past few years and have opened new avenues for investments.

“The capital markets are really transforming. They are becoming more efficient. Governments are ensuring that privatisation deepens the markets here,” he said.

“I think Abu Dhabi in particular, has really done very well, and it's becoming an important financial hub in the region,” he said. Investcorp has listed its subsidiary Investcorp Capital on the ADX because it expects the bourse to continue to grow and attract more companies and capital, he added.

Tech investments and Asia focus

Mr Alardhi remains bullish about technology investment and said the company plans to build on almost two decades of success and will continue to seek opportunities to expand its technology portfolio globally.

“What helped us is that we've been investing in technology now for almost 17 [or] 18, years. We've done it in Europe, we've done it in the US and we're doing it in the Gulf,” he said.

In 2022, Investcorp, through one of its subsidiaries, invested in Saudi Arabia-based NourNet, a connectivity, cloud, cybersecurity and managed services provider that Mr Alardhi said is “bridging east and west” in that space.

In September 2023, Investcorp also led a $100 million funding round for Trukker, an Uber-like digital network for lorries and pick-up trucks in the Mena region. It is buying 100 electric trucks from China to service the region, he said. “We've invested in companies that are changing the dynamics of trade and co-operation between regions.”

Markets in Asia are also a central plank of Investcorp’s investment strategy, he said. “Our focus on Asia is really big, whether it is India or China, South-East Asia or North China or North Asia, Japan, Korea [as well as] Malaysia, and Indonesia,” he said.

Within Asia, fundamentals of China in particular have not changed and it still remains a huge market and a big economy where a lot of innovation is taking place, Mr Alardhi said.

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