From his office in Paris overlooking the Seine, 47-year-old Fady Michel Abouchalache, Chief Executive Officer of Quilvest group with $18 billion in assets under management, is proud to show off his latest art piece, a framed limited edition Hermes scarf with a large cedar specially produced for Lebanon.
Abouchalache spent his first 18 years in Lebanon, before emigrating to the United States where he earned a suma cum laude (the highest praise) graduate degree from the Wharton School of Business, an affiliate of the University of Pennsylvania, and a Masters in public administration from Harvard. Then, with experience as a senior manager at consulting firm Bain and Company and as a banker in the merger and acquisition department of Tucker Anthony, Abouchalache decided to leave behind the land of Uncle Sam’s financial sophistication to take a shot at evolving the financial markets in the underdeveloped Middle East.
In 1998, along with two partners Fadi Majdalani and Sami Khoury, Abouchalache co-founded Beirut-based Delta Capital with the aim of pioneering private equity (PE) in the Middle East. At that time, there were only a few PE players in the region. Abouchalache and his partners faced several challenges, from highly volatile economies to the dot-com burst in capital markets, leading them to end their foray in the region’s PE market.
“Our experience at that time was that the Middle East was not ready for PE,” says Abouchalache. Failing to be an initiator of PE in the region, Abouchalache headed back west, but this time a little closer to home, on the hunt for a career at a European based private equity firm. In 2001 his quest landed him a job at the Paris office of Quilvest, a global wealth manager and private equity investor whose history dates back more than a century.
Abouchalache eventually became CEO of the group and of its private equity arm, Quilvest Private Equity. Under his leadership, the group’s assets under management grew from $5 billion to $18 billion, while Quilvest Private Equity, which has been around for 40 years, grew its assets from $400 million to $4 billion, with the aim of reaching $7 billion in the next five years. The PE’s 17 funds are all in the money with an average 15 to 20 percent annual return.
“We don’t have one product that lost money in the past 11 years despite the crisis,” says Abouchalache with a smile. Now he has turned his sights back to the region. With his Middle Eastern background, he has helped Quilvest secure 20 percent of its funding from Middle East investors. The group started developing their focus on clients from the Middle East eight years ago, with a strong focus on Saudi Arabia and the United Arab Emirates.
Though personally active in the region through, among other things, his membership on the board of Endeavor in Lebanon — a nonprofit organization dedicated to supporting high impact entrepreneurs in emerging markets — Abouchalache has not invested in private equity in the Middle East.
“We have not closed the doors, we are very opportunistic but it is not our highest priority market at this point as it needs another five to 10 years of maturity,” he says, pointing to the shallow capital markets, political instability, a shaky legal framework for PE, and a lack of relative experience in the ranks of managers.
When asked whether the Arab revolutions will change the landscape in the Middle East and create opportunities for entrepreneurs and small and medium enterprises, the central point of Quilvest’s investments, Abouchalache says “it is too early to tell,” and so for now he will continue to prudently tip-toe into the region while focusing on other regions that present more lucrative opportunities.
Abouchalache expects Africa to be “the new kid on the block” in the PE industry. In the region, Turkey is the most interesting market, “by far ahead of the pack.” For Lebanon, his recommendations came as no great surprise: Abouchalache said he believes Lebanon could be an amazing incubator for start-ups and small companies, where they could reach a certain size and then develop abroad to eventually reduce their local exposure; but, he sees little potential in terms of big-ticket investments.
The interview ends on a note of cautious optimism: Abouchalache says the first three months of the year have been promising for Quilvest, but while the performance of their portfolio of companies is pointing towards a recovery, the state of the world, financially and politically, leads even him to warn: “God knows whether this is sustainable or not.”
