NBK Capital closes $125m Kuwait fund

The Middle East investment firm's third private equity fund will allow foreign contractors in Kuwait to fulfill ‘offset obligations’ through an investment in the fund.

NBK Capital, the investment and merchant banking subsidiary of the National Bank of Kuwait, has raised $125 million (€80 million) for its third private equity fund.

The Kuwait Investment Opportunities Fund has been raised entirely from foreign investors, mainly from Japan and Korea, Faisal Al-Hamad, a director at NBK Capital, told PEO.

It has been approved by the National Offset Company to serve as a vehicle that will allow foreign contractors operating in Kuwait to satisfy their “offset obligations”. According to the provisions of the offset programme, any foreign entity that wants to purchase a contract in Kuwait is required by the government to invest 35 percent of the monetary value of the contract somewhere else in the country, either directly or indirectly.

By investing in the Kuwait Investment Opportunities Fund fund, foreign contractors shift the burden of fulfilling their investment obligations to NBK Capital, which will identify, operate and exit investments on their behalf.

The firm will pool the obligations of the contractors and invest them in Kuwait in high-growth sectors such as education, healthcare, manufacturing and technology. Though the primary focus is on providing growth capital to companies, the fund will also consider investments in specific early-stage opportunities.

Al-Hamad said in a statement: “Kuwait has benefited from strong economic growth in recent years as a result of the surge in oil prices and reinvestment of petrodollars and this, coupled with a substantial increase in government spending and an appealing demographic profile, has resulted in significant investment opportunities in Kuwait's economy.”

In addition to the Kuwait Investment Opportunities Fund, NBK Capital manages the NBK Capital Equity Partners Fund and the NBK Capital-GSC Group Mezzanine Fund.

The $250 million NBK Capital Equity Partners Fund invests in the GCC, Turkey, Egypt and the Levant region. It completed its first exit earlier this year when it sold its 100 percent interest in Turkey’s Yudum Foods, an edible oils company, netting a 2.8 times cash return on its investment and an IRR of 318 percent, the firm said.

The firm’s $200 million mezzanine fund was established together with US-based alternative assets manager GSC Group and it makes investments in MENA and Turkey.