PRIVATE EQUITY PERFORMANCE IN THE GULF COOPERATION COUNCIL COUNTRIES: AN EMPIRICAL ANALYSIS

Abstract

Private equity (PE) in the Gulf Cooperation Council (GCC) region1 is a new asset class that has been informally structured and formalized towards the beginning of the last decade (early 2000). New private equity firms were established with more generic private equity funds established in 2002 and 2003. No publicly available private equity performance data are available that shed light on how the GCC region compares to other regions in the world, thus creating a gap in the body of knowledge for private equity in academia. This thesis explores the performance of private equity General Partners (“GPs�) domiciled in the GCC over the 10-year period from 2004-2014. Our data collection entailed proprietarily collecting 306 PE portfolio companies directly from general partners in the GCC, as there is an absence of any compulsory reporting requirements for PE investments. We performed a multiple regression analysis to examine the relationship between the Internal Rate of Return (IRR) as a dependent variable and the independent variables of investment ticket size, sector of investment, location of investment, investment-holding period, Shariah-compliant and conventional investments, and legal type of investments. We analysed the performance of private equity General Partners represented by the IRR, and our results show that only the investment holding period is statistically significant. We also compare the performance of the private equity portfolio to the S&P GCC Composite Total Return Index over the period of 2004-2014, and we find that the private equity portfolio underperformed the index by an average of 2.37% per annum. Overall, our findings show that private equity, as an asset class in the GCC region does not provide higher investment returns than public equities. These findings can be used as a basis to explore other areas relating to the private equity industry in the GCC region, such as examining if there is any relationship between PE performance and the possession of GCC experience by investment managers with the GPs, or if there is any relationship between the incentive structure of GPs and the performance of PE.

Date of Award	6 Jan 2021
Original language	English
Awarding Institution	The University of Manchester
Supervisor	Brahim Saadouni (Supervisor) & Abdulkadir Mohamed (Supervisor)