The Downfall of Dubai’s Star Investor

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Pakistani financier Arif Naqvi shared a stage with Bill Gates at the World Economic Forum in Davos, Switzerland, in January for a panel on global health. Naqvi stood out for his enthusiasm: “Like Bill, I’m an optimist,” he said. “So I believe the glass is half full, very firmly. I don’t believe it’s half empty.”

Unbeknownst to the audience, four investors in Naqvi’s Dubai-based $1 billion health-care fund, including the Bill & Melinda Gates Foundation, had recruited forensic accountants to investigate where their money had gone. The existence of the inquiry was first reported less than a week later by the Wall Street Journal. A subsequent review by Deloitte LLP, made at the request of Abraaj Group, Naqvi’s holding company, found it had dipped into money reserved for the health-care fund as well as a private equity fund, according to a draft summary sent to creditors and seen by Bloomberg News. Abraaj’s senior managers shared “collective responsibility” for “lapses in governance and control,” Deloitte said

For the United Arab Emirates, the swift collapse of Naqvi’s reputation and troubles at the Mideast’s biggest private equity firm threaten its reputation as a business hub. Abraaj has grown along with Dubai’s desire to create a world-class financial center. When it peaked at $13.6 billion worth of assets under management last year, it appeared to have lived up to the lofty name Naqvi chose for it years before: Abraaj means “towers” in Arabic.

Naqvi, 57, built his reputation as the Gulf’s buyout king producing stunning returns in places few were brave enough to venture, snapping up stakes in a dairy company in West Africa, an upscale office building in Cairo, and a food maker in Colombia. In charismatic conference appearances, he insisted on referring to emerging markets as “growth markets”—a nod to the return potential of such places as India and Egypt, but also a sly dig at a developed world stagnating under the weight of an aging population and mountains of debt.

In recent years he promoted the concept of “impact investing,” the notion that private capital can be deployed to alleviate some of the world’s most intractable problems: poverty, climate change, inequality. Abraaj held out its health-care fund as a prime example of how private money could be profitably and virtuously used in Africa and South Asia, where it had invested in companies ranging from a diagnostics business based in Islamabad to hospitals in India. It was this pitch that helped reel in the Gates Foundation, among other prominent investors.

Born in Karachi, Naqvi was an immigrant outsider in the countries where he made his name. Before his arrival in the UAE, he worked at the Olayan Group, the dynastic Saudi Arabian conglomerate founded by billionaire Suliman Saleh Olayan.

His origin story as a Gulf power player begins in 1999, when he and his little-known investment firm, Cupola Investments Ltd., fought off established private equity giants to win Inchcape Plc’s Middle East portfolio, worth $150 million. It was the first leveraged buyout in the Middle East and marked Naqvi’s arrival on Dubai’s nascent investment scene, more than 10 years before glittering skyscrapers such as the Burj Khalifa crowded the skyline.

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