Investcorp: can Kirdar's gamble work?

There isn't much you can tell Khaled al-Zayani about how to succeed in business. Or Ahmed al-Mannai, or Hussain al-Fardan, or Ahmed Ali Kanoo.

Like Omar al-Aggad, Abdulaziz al-Sulaiman, Dawood Musaad al-Saleh, Abdul-Rahim Galadari, Abdul-Rahim al-Atiqi and the others on the board of Arabian Investment Banking Corporation (Investcorp, for short), they're very rich, and they already have substantial overseas investments. But there's a gap in their lives, and they hope Investcorp will fill it.

Khaled al-Zayani's family wealth dates to well before the oil price revolution of 1973. The Zayanis started in the time-honoured way in Bahrain: pearl-fishing. "Business was considered improper for Arab families," recalled the 38-year-old president of Zayani Investments.

Now, the Zayanis control the Bank of Bahrain and Kuwait, the Delmon Hotel in Bahrain, they own shares in other hotels and one in London, they are big in manufacturing — drawing 10 to 12% of Bahrain's aluminium plant output — and they are distributors for Rolls-Royce and BMW cars, as well as Mitsubishi and Chrysler.

Like Ahmed al-Mannai, they already have sizeable overseas investments. Mannai first invested in Texas in 1975. He owns in Houston a magnificent condominium and health centre called the Houstonian. It even offers woodland jogging tracks, which Mannai uses when visiting. Mannai, too, has a diverse range of interests in the Gulf, from car sales (General Motors) and construction to oilfield services, heavy industry and agriculture.

While some of his counterparts still run, or pretend to run, their conglomerates, Mannai has formed a corporation along holding-company lines allowing each business its own corporate entity and its own executives. "He's the most sophisticated in terms of management structure in the Gulf," said one admiring banker.

Mannai is a Bahraini who crossed to mainland Qatar as a young man to seek his fortune. He succeeded; just like Hussain al-Fardan, another immigrant from Bahrain. A few blocks away from the Mannai headquarters in Doha, Fardan sits in his office above one of his jewellery shops, a Reuter monitor dominating one end of his massive desk. The screen hints at his success, because as well as owning jewellery shops the length of the Gulf, he's also managing director of the Commercial Bank of Qatar.

"I was one of three employees in the Chartered Bank when it opened in Doha," he recalled. "I worked for a few years with them, then I started my own business with pearls. I converted to jewellery, then banking and other kinds of business." He started the Commercial Bank "with my friends in 1974". Now it's the biggest after the 50%-government-owned Qatar National Bank.

Fardan, a Qatari citizen and now one the leaders of the Doha business community, has ventures in Houston, London and other major centres.

Ahmed Ali Kanoo is the head of the sprawling family trading and industrial empire. Abdulaziz bin Qassim Kanoo is prominent on the Saudi side. Ahmed Kanoo is dismissive of western bankers' ideas of what he needs. "Bankers come and offer me portfolio management and I say: 'You must be joking. I've had portfolio management for the last 20 years'."

Abdul-Rahman al-Atiqi was Kuwait's finance minister for 14 years until 1981. He now has a string of bank chairmanships and directorships.

Omar al-Aggad, the Palestinian-born Saudi entrepreneur, is best known in western business circles for his masterminding of the Arab purchase of 25% in Smith Barney. He is reckoned by some to be the most professional executive in the Middle East. Abdulaziz al-Sulaiman, another Saudi worth several billions, owns large stakes in Crédit des Bergues in Geneva, Petra Capital Corporation in New York and Frab Bank in Paris.

All these men want to improve and diversify their investments, and they see Investcorp as the vehicle through which they can achieve this: "I'd rather have a bigger project than just Zayani Investments," said Khaled al-Zayani. "We have to grow out of living in the village and go into the city."

Khaled al-Zayani showed early interest in Kirdar's project

Many eminent Gulf and Saudi Arabs seem to be travelling in the same direction. Among the shareholders not on the board of Investcorp are: Ahmed Zaki Yamani, Saudi Minister of Petroleum and Minerals; Mana Saeed al-Otaiba, his counterpart in the United Arab Emirates; Khaled Abu Su'ud, the Kuwaiti ruler's adviser on investment; Sheikh Suroor bin Mohammed al-Nahyan, right-hand man to the ruler of Abu Dhabi; Abdulwahab al-Tammar, the chairman of Kuwait Foreign Trading, Contracting and Investment Company and of Arab Banking Corporation; Ebrahim al-Ebrahim, chairman of Arab African International Bank; Yousif al-Shirawi, Bahrain's industry minister; and members of the ruling families of Bahrain, Saudi Arabia, Kuwait, the UAE, Qatar and Oman.

It's quite a list: 335 founding shareholders, the cream of an Arab Who's Who. But then Investcorp is a new concept in several ways.

"It's the first real investment bank to be set up in the Gulf," asserted Investcorp Chairman Atiqi. And it's a rare act of cooperation within the private sector in the region. Assembling all the major families of the Arabian peninsula in one venture is a remarkable feat, and restricting them each to no more than 0.5% of the issued capital of $200 million ($500 million is authorized) is even more remarkable. Earlier institutions have been dominated by only one or two families or nationalities.

Usually, it has been a case of Kuwaitis looking for somewhere to base a bank or investment company outside Kuwait to avoid government restrictions there: Mohammed Yousef Jalal, another prominent Bahraini merchant and Investcorp director said: "Most of the companies that registered here came from Kuwait and they said: 'We want to start a company and these are the people involved.'"

Investcorp parallels in the private sector the cooperation at government level in the Gulf Cooperation Council between the six Arabian peninsula states. With the lines between government and private sectors traditionally blurred in the region, some see this parallel as important in itself. Ahmed Ali Kanoo, Investcorp's vice chairman, could not "emphasize enough the great rewards to be gained from the Gulf states working together closely on political issues, on foreign policy and on economic policy. So there is this great sense of unity about Investcorp."

In addition, in the creation of the new corporation the founders have gone out of their way to do everything by the book, to float the company in a way that would not have come amiss in London or New York.

"It was the first company in this part of the world to come with a strategic plan," said Ismail Amin, partner in the accounting firm of Ernst and Whinney in Bahrain. There was almost fastidious attention to detail. From floating the shares, to forming a broad-based management group, to designing and fitting out the headquarters in Manama's diplomatic area in Bahrain, every item has been agonized over by Nemir Kirdar and his colleagues.

Kirdar, Investcorp's president, is a highly persuasive Iraqi who was Chase Manhattan's key man in the Gulf previously. He introduced Qatar to the Euromarkets in 1977 in a deal still remembered, along with Nigeria's first jumbo, as one of the market's epics.

Investcorp is Kirdar's brainchild. And he seems to have possessed exactly the right combination of toughness and charm to make it a reality. He's also determined to set new standards of professionalism. These are American business school and bank standards, which is no bad thing, but it often means a surfeit of references to "adding value" and chart-scrawling on blackboards.

All the executives are sent on the Harvard advanced management course in Switzerland. Most have come from American institutions, especially Chase, though they're not all Americans. Cem Cesmig, an Americanized Turk, who was in charge of the Middle East and Africa for Bankers Trust Company in New York, is general manager of the London office of Investcorp. His counterpart in Bahrain is Yusef Abu Khadra, a Palestinian who previously worked for Morgan Stanley in New York. Michael Merritt, an American and, like Kirdar, formerly a Chase vice president, has been assistant to the Investcorp president and is now director of investment placement.

Another Chase man is Elias Hallack, a dapper Lebanese. As Investcorp treasurer, he's one of the main money earners for the bank at the moment, deploying the capital in the money markets. The other early recruit, not unnaturally in view of InvestCorp's thrust, was a real estate expert, John Thompson. He is a Briton, experienced in investing on behalf of Arabs after spending over five years as property investment manager with the Abu Dhabi Investment Authority.

Assembling such a large management team right from the start is unusual in the Gulf. The aim was to avoid the jibes levelled at other new Arab banks of being flashes in the pan or one-man shows.

The irony is, because of the time taken to get Investcorp up and running, other criticism has been attracted. Four years after the plan for the new institution was conceived and a year after incorporation, the bank has only just revealed its first major piece of business — excepting the purchase of the head office building in Manama. One US investment banker in London sneered: "They spent months deciding who was going to have which office and how much space they were going to have and even what kind of chairs they would sit on."

Acknowledged former Arab Monetary Fund president and Investcorp director Jawad Hashem: "We have heard some criticism that we're taking our time, that we're doing too many studies. But it will pay in the long run."

Another barb thrown at the Investcorp people is the lack of investment banking experience. "What do they know about the business?" asked one New York investment banker tartly. "They're all commercial bankers." To which Kirdar replied that it was important to recruit first executives who'd proved they could manage. The specialists in securities, corporate finance and so on can be hired later (and Abu Khadra has already had considerable experience in these areas). 

No one can deny that contacts matter most in the Gulf if deals are to be structured for consumption there, and all the Investcorp staff have had years of experience in nurturing those. Merritt admitted it "bothers him a bit" that four of the initial management team were ex-Chase people. But he added that it helped "by giving some coherence in their approach" to running the new firm.

Another problem might be the dramatic change in outlook for the Gulf since Investcorp was conceived at the height of the second great surge in oil prices. With the price cut earlier this year, spending schedules in both government and private sectors have become a lot tighter. Even so, Kirdar is not worried: "The private sector by itself is a generator of surplus funds. The target market for Investcorp is there regardless of changes in government income," he said.

Certainly, Saudi Arabia's reserves are reckoned to be over $150 billion and Kuwait's about $80 billion. As Chase Manhattan executive vice president and head Of international banking, Francis Stankard, put it: "Whatever happens to the oil price, there's still going to be a lot of money in the region."

That was confirmed by Investcorp's Oliver Richardson, who also used to work at Chase: "Most merchants are still generating surplus capital from their trading activities. They still have a pool of funds, and mostly they're in short-term investments waiting for long-term opportunities."

Some Arab merchants, indeed, see the slump in oil revenue accretion as a blessing in disguise, a chance to slow down the frenetic pace of development and take stock. Said Abdulaziz Kanoo: "In a way, we are glad about it." A slowdown in the pace of development at home means more private sector money looking for some employment overseas.

Investcorp, which will make real estate and direct corporate investments abroad, as well as in the Gulf, is well placed to channel this money. For the bank's shareholders who already have substantial overseas investments, Investcorp sets out to offer two new advantages.

One is quality deals. Investcorp's muscle means it should be able to compete with the world's top institutional investors for prime pieces of real estate and corporate acquisitions. "If we were a small organization," explained Khalid al-Zayani, "we would receive only the 10th offering on any deal." As it is, Investcorp has been able, in its first major deal, to acquire 50% of a prime office building in Los Angeles, Manulife Plaza, with leading Canadian insurance company, Manufacturers Life, taking the other 50%.

"Who of the American insurance companies would talk to us if we weren't the size of Investcorp?" asked Zayani.

And it's not only the size of the capital that can be made to count by Investcorp. It can also call on its 335 founding shareholders and other investors among whom it can syndicate the parts of deals that it does not want to take on to its own books. The shareholders alone provide formidable placing power.

Abdul-Rahim al-Atiqi, chairman of Investcorp: "It's the first real investment bank to be set up in the Gulf."

The other advantage Investcorp offers the sophisticated Arab investor is further scope for diversification. He'll have the opportunity of taking smaller interests in greater number of projects, spreading the risk, than he would if he tried to operate by himself. "You can't own New York City or London," said Zayani over tea in the latest hotel in London to become owned by Arabs, the Churchill. "This way your business volume becomes bigger and your risk is less."

On top of this, there's the argument that investors will have greater confidence in any deal offered to them by Investcorp because the bank will be putting up some of its money. "Unlike most existing Arab investment companies, which act solely as transaction brokers," observed Mohammed Jalal, "Investcorp will co-invest in each deal marketed, so maintaining a continuing business association with its investment clients."

Everyone involved in the bank, and many in the Gulf that are not, enthuses about the new venture. "Before this," explained Ahmed Ali Kanoo, "we were accustomed to only straight commercial banking here. Other sorts of banking and portfolio management had to be got from overseas. So when Nemir Kirdar came around with his idea for the bank, it was really something." Because Investcorp has rounded up all the big names, including the Saudis — especially significant, according to Kanoo – "it is strong and solid and people have greater confidence because of it".

Said the manager of a major American bank in Bahrain: "Most new investment companies offer a grab bag of services. Investcorp seems to know what it wants, it's well conceptualized and it's got a wide range of shareholders." Another American banker in Bahrain thought Investcorp had "the best chance of all the new institutions of making a go of it".

Added the Bahraini Minister of Commerce Habib Qassem: "The idea of trying to bring those who want to invest worldwide together under modern management has been well received by people of importance." There is also some relief, it seems, on the part of the Bahraini authorities that Investcorp turned out not to be another speculative vehicle for gambling on the unofficial Souk al-Manakh stock market in Kuwait, where post-dated cheques financed a $90 billion orgy of speculation before the inevitable collapse in the summer of 1982. The minister said: "In 1981 and 1982, many people were trying to get rich immediately. But Investcorp is not of that nature. It was envisaged as a long-term investment vehicle."

Kirdar claimed that Investcorp has invested not a single fil in the Manakh, though he was under pressure from some of the shareholders to do so for a time.

And it's a source of embarrassment around the bank's temporary headquarters in Bahrain's Holiday Inn that some of the big losers in the Manakh including Jasem al-Mutawa (net debts about $10 billion), his brother Najeeb and Jawad Bu Khamseen are among Investcorp's shareholders.

Mohammed Jalal noted the lack of planning and management of previous investment ventures in Bahrain. He should know. He started the Bahrain Investment Company three years ago and, after trying to get Banque Arabe et Internationale d'Investissement to manage it, went through three different managers. "A lot of banks. started before Investcorp with no general manager," he said. "Investcorp is the answer to our problems." Kanoo added: "For the first time, a company from the Gulf is going to be doing exactly the same as the international banks."

The antecedents of Investcorp go back some way. In 1977, Kirdar, who'd worked out a strategic plan for Chase in the Middle East over the previous two years, moved to Bahrain to establish Chase's regional office. It was then that he started to see the need for an investment bank to serve the holders of surplus funds. But he was too busy building up the Chase presence in the Gulf to do anything about it. "It remained a dream," recalled Kirdar, whose accent betrays his long service with US banks.

It wasn't until he was seconded by Chase to work for the Arab Monetary Fund in Abu Dhabi that his idea began to crystallize. That was in 1980. Kirdar worked directly for AMF president, Jawad Hashem, another Iraqi, as an adviser. He worked on the Investcorp project partly in the AMF's time and partly in his own. Hashem encouraged him; he is now on the board of Investcorp too.

In some circles, Kirdar's role at the AMF and his subsequent venture might have been seen as a conflict of interest. But Hashem and Kirdar retort that they did precisely what the fund was meant to do.

Hashem recalled: "Nemir told me of his idea but said it was difficult to pursue at Chase. So I said, 'Come to the AMF and I'll consider your work part of our technical assistance programme.'" That programme included support for the development of the Arab capital markets, one of the objectives of Investcorp.

Because the AMF is a government-owned body, it could not, by definition, get involved directly in private sector enterprises. But Hashem saw the need for promoting such ventures. "There were already so many government agencies that were providing assistance to the private sector," he pointed out. He favoured more self-reliance in the private sector, even though he'd spent all his life in the public sector in before joining the AMF.

But Hashem didn't discuss Kirdar's project with the AMF board of governors. "I was the chief executive there and it was my prerogative," he said, with some force. Kirdar's 10-month assignment at the AMF ended in May 1981. By then, he'd discussed his idea with a lot of his friends and contacts in the region and got "a kind of green light". It was no longer an AMF project, he said, because "it was not their mission to create vehicles for the private sector".

Kirdar, free of the AMF, then took his big gamble. He decided not to go back to Chase, and went all out to set up Investcorp. The first subscriptions to shares of $250,000 were solicited. Kirdar made the first of these with borrowed funds. The next five or six subscribers were also Iraqi, according to Hashem, though no Iraqis apart from Kirdar and Hashem appear on the list of shareholders.

Kirdar, still with no formal post within the fledgling organization, also recruited the first employee, Mike Merritt. He joined Kirdar rather than take the next job Chase was offering him, general manager in Malaysia. Merritt is credited with smoothing out the obstacles in the path of the bank's formation. He came into banking the hard way, joining Chase in Vietnam in 1968 after two years as a pathfinder Detachment Commander.

By August 12 1981, a founders meeting could be called. Some 25 to 30 people attended the Bahrain Hilton to elect a founders' committee with Kirdar as coordinator. That was the first time Kirdar had addressed as a group the people who were backing his project.

The problem at this stage was to keep the momentum towards more shareholders going. Kirdar wanted as wide a geographical spread of participants as possible to give Investcorp solidity and placing power, and to avoid domination by any single nationality. Said Hashem: "We wanted to avoid a single state taking control of the company and we wanted to avoid speculation."

Rounding up founders from every Arabian peninsula state was not easy for Kirdar. For many of the wealthiest, Kirdar's target, the idea that they shouldn't own more than 0.5% of a venture was novel. "When I convinced them of the value of the project, a lot of people wanted 10, 20, 30% or more of it," he said.

He began where he was known best, in Bahrain and Qatar. One of his first calls was on Hussain al-Fardan in Doha. Kirdar first brought the idea to him in 1979, said al-Fardan. He warmed to it because "I feel, and all my friends feel, they can trust this company because it comes from the people here and is being run by honest, experienced staff."

Kirdar also made early approaches to Zayani and Jalal in Bahrain, and to two of the big merchants in Kuwait, Dawood Musaad al-Saleh and Khalid al-Babtain. "These were among the very first," recalled Kirdar. "Had they not encouraged me, I would not have pursued the project."

It was also important to get the backing of the Bahraini ruling family, if Investcorp was to operate there. Kirdar secured this through Ahmed Ali Kanoo, later to become the bank's vice chairman.

The hardest challenge was Saudi Arabia. Kirdar had never been there before. (At Chase, he was in charge of marketing the Gulf littoral states, while another vice president in Bahrain handled Saudi Arabia.) "I thought at first we should start the company without Saudi Arabia," Kirdar revealed. But possible leads started to emerge through Ahmed Kanoo in Bahrain. He arranged for Kirdar to meet his cousin in the Saudi branch of the family, Abdulaziz, who lives in the kingdom's oil-rich Eastern Province. "Through him, I met business people in the Eastern Province and, as I talked about wanting to meet comparable people in Riyadh and Jeddah, names started to come up," Kirdar related.

One of these names was Abdulla Taha Baksh, who eventually became an Investcorp director. But it was only on Kirdar's third trip to the kingdom in the spring and early summer of 1981, that he started to get anywhere. "It was difficult to get to see the right people because they didn't know me," explained Kirdar. The breakthrough came in June when Omar al-Aggad joined up.

Later, through Baksh, Kirdar met Ahmed Zaki Yamani, Opec's most widely-known oil minister (though now enjoying less of the limelight). "Baksh took me to Yamani's residence in Jeddah in October or November 1981," recalled Kirdar, "and I made my presentation." Yamani came in as a founder for the maximum allowed, $1 million (as did the UAE's oil minister, Mana Saeed al-Otaiba).

The momentum was building up. "My presentations were much more intensive for the first 100 founders, and far more so for the first 25 or 30," admitted Kirdar.

Kirdar with Abdulaziz Kanoo (left): "Through him, I met people in the Eastern Province."

By now, two important decisions had been made. The first was the name of the fledgling institution. Several prototypes were floated before Investcorp caught on. Its compactness appealed to Kirdar, who compared it with Citicorp, Chase and Chemical, and he was determined not to have initials: "Nobody knows what the hell they stand for."

The other decision was location. An early runner was Luxembourg. One of the directors of the bank told Euromoney that he preferred Luxembourg, but as an Arab he didn't want to be quoted on that. He was in a minority. The shareholders naturally wanted the bank to be based near them.

Meanwhile, Kirdar, realizing perhaps that his lack of investment banking expertise could be considered a handicap, had been to New York to talk to some of the prime investment banks and investment departments of commercial banks. In December 1981, he organized what Merritt called "a brainstorming session" in Bahrain. For three and a half days, he sat in the Holiday Inn and thrashed his plans out with five people in the investment business: three from New York banks and two from Gulf investment bodies.

In January 1982, Kirdar reached his century. The first 100 founders had each subscribed to $1 million of shares and paid $250,000. "Once the 100 names became known," said Kirdar, "the pressure to subscribe became insurmountable." But the next layer of founders had to come in for less than $1 million: 235 subscribed $59 million on top of the $100 million from the first 100. Another $15 million was set aside for employees of Investcorp (another unique feature intended to bind professionals more closely to the company) and $26 million was earmarked for public subscription.

Among the founders were several commercial banks from Bahrain, Qatar and Oman. The idea seems to be for them to use Investcorp as their merchant banking arm. Said Kirdar: "We thought, if we could service their clients, they'd make money and we'd make money." Nooreddin Nooreddin, chief executive of the National Bank of Bahrain said: "Investment banking is one of our objectives, but up to now we've had other priorities." Those priorities were the provision of basic commercial banking services, which according to Nooreddin, "the banking industry could barely accommodate in the 1970s".

The pace hotted up in the early part of 1982. With the closing of the list of founders in March 1982, the focus shifted to the public subscription for shares. It was the last of the big public share offers in the Gulf — the Manakh had already begun to creak under the speculative strain — and it was probably the best organized, despite the overwhelming demand which saw the offer 1,400 times oversubscribed.

Special offices and staff were laid on to cope with the demand in April and May last year. Every subscriber had to present a passport or identity document: One man was entrusted with 16,000 passports. Others tried less scrupulous methods of laying their hands on more than the 240,000 maximum shares allowed, by buying the passports of others. The price for the use of a Bahraini passport reached about $75. Said Ismail Amin: "Bahrainis managed to duplicate about 9,000 passports in the applications for shares, but we found them out and cancelled them."

The whole process was lucrative for the Bahraini banks which got fees and deposits as a result. It was also profitable for Investcorp.

Indeed, Kirdar claimed the new bank's first deal "was the creation of Investcorp itself". The first 100 founders were charged 1% of their subscriptions, the next 225 an extra 5%. Public subscribers were charged 5%, but expenses were high. "To process 611,000 applicants costs a lot," said Merritt. Even so, $4.6 million was gathered before expenses were taken into account.

Hatem Zu'bi, a former Jordanian minister who is Investcorp's lawyer in Bahrain, said that new standards had been set for share offerings in the Gulf. Previous offerings had been marred by reconciliation problems and there'd been litigation over the discrepancies. "We've had none of that. There have been no complaints or mishaps," he said. Merritt added: "We hope the next company to be formed comes to us to do it."

On June 20 1982 the constituent assembly and first board meeting were held and Investcorp was ready to go.

To outsiders, it doesn't appear to have gone very fast. The first big deal — the real estate venture in Los Angeles — has still not been officially announced. In theory, the objectives behind Investcorp and the timing of its creation couldn't be better. The demand for corporate finance and investment advisory services has never been stronger. The drop in oil revenues which has given Saudi Arabia its first trade deficit for 20 years and the UAE a record budget deficit has sharpened the pressure on many companies in the Arabian peninsula. Those that got by before the slump with a minimum of management or financial planning may be finding life more demanding now.

Said Robert Cummings, general manager of Bankers Trust Company in Bahrain: "This is a time when management is really going to be tested, whether of banks or corporate entities. The last five years were boom time. Where mistakes were made, it didn't matter."

Some bankers are even predicting corporate collapses if oil prices don't pick up soon. But they're all agreed that a new approach is needed with the change in fortunes of the countries in the peninsula where they operate. "There's still a lot of business to be done, but banks have to redefine their mission in this region," argued Katch Katchadurian, general manager and chief executive of the Bahrain Middle East Bank and a nephew of the Soviet Armenian composer Aram Khatchaturian.

Katchadurian (he prefers a "d" to a "t") worked with Kirdar at Allied Bank International in New York in the early 1970s. He maintained: "The corporate banker who sits in New York and deals with General Motors, IBM and so on, he'll have to be brought out here." Added an American banker: "The advantage will be with the bigger banks, especially those that have something else to offer apart from money."

Certainly, Investcorp has as one of its aims general corporate finance services. According to the Bahrain general manager, Yusef Abu Khadra, the bank aims to underwrite new equity issues, help companies go public and put together new companies "on a pan-Arab or pan-Gulf basis". He saw Investcorp being active in the promotion of new stock exchanges such as Bahrain's (due to open next year) and Saudi Arabia's and, in the longer term, in the sale of government shareholdings in state concerns to the public. Abdulaziz Kanoo noted: "It's a definite philosophy of the Saudi government to sell off government companies to the public as soon as they become profitable. The possibilities are there for InvestCorp to get involved."

Investcorp executives also relish the longer-term prospects of a role in the incorporation of some of the gigantic trading empires in the Gulf, and even the sale of some shares in them to the public. But initially, the emphasis will be on quality, long-term investments on behalf of the shareholders.

The collapse of Kuwait's Manakh market has had a salutary effect on investment attitudes in the region. People are prepared to consider much more realistic returns than the 100% or 200% a week they could sometimes make in the souk, and they've moved back towards the more established markets. Isamu Tachibatake, executive director and general manager, investment, of Nomura Investment Banking (Middle East) in Bahrain, noted the "greater demand from this part of the world for the management of international funds". The Sci-Tech Fund, for example, "has been extremely well accepted here". The fund is managed by Nomura, Merrill Lynch and Lombard Odier.

"There's a demand for investment advisory services across the board," agreed Khaled al-Fayez, general manager of the government-owned Gulf International Bank. But like other banks in Bahrain, GIB can offer only minimal assistance in this field.

Even those who, like Ahmed Ali Kanoo, have had portfolio management for years, still look for something better. "The Swiss are still the best bankers," he said, "but their ideas have now been adopted by others." He believed it was essential to have absolute confidence in your bankers. "I believe in the long-term, not the short-term. I'll put $10 million, $100 million or whatever into a portfolio and I'll want to know every quarter how it's doing, but I'll reinvest it."

However, Investcorp won't be starting this way, because what the Investcorp shareholders want is the glamorous deal that even they, with their wealth and experience, couldn't negotiate themselves. The standard example thrown around Investcorp headquarters is 20% of BMW — the kind of prestige transaction the shareholders can identify with immediately. "It's no good offering them a condominium in Louisiana," confided one executive, "because they won't know where it is."

Kirdar is aiming for one or two big deals a year as a start; they're more likely to be in the west than in the Arab world, and they're probably going to be real estate transactions, given Investcorp's present staffing. Kirdar aims for a return of 15% on equity for the first 18-month financial year, to the end of 1983: such a target is almost unheard of in its modesty in the Gulf. It reinforces the new institution's claim not to be an instrument of speculation.

About 40% of the earnings will probably come from fees (from the floating of Investcorp, from customers and from foreign exchange) and the rest from assets totalling about $108 million at present. These include the corporate headquarters in Bahrain ($10 million), prime US equities ($15 million), triple A corporate bonds ($5 million) and the stake in Manulife Plaza ($52 million). Investcorp will retain an interest in this but is placing the bulk of the investment with selected participants in the Gulf.

But for all the claims that none of the directors or shareholders is expecting a quick buck out of Investcorp, one detects some frustration at the slow pace at which the first deal is emerging after all the publicity surrounding Investcorp's launch over a year ago. "When a few deals start coming," vice chairman Kanoo said reassuringly, "people will have confidence in Investcorp. It takes time."

Assembling the glittering array of holders was a remarkable feat on Kirdar's part. Now he has to perform something even more remarkable to keep a large number of the world's richest families happy. When you're only as good as your last deal — as many investment bankers would claim in today's transaction-dominated markets — it can be tough when you've only just done your first.