Bahrain-based alternative investments specialist Investcorp said its net profit for the first half of fiscal year ended December 31, 2011 fell 90 per cent to $5.3 million from $56.2 million the year before hit by negative returns on hedge funds.

Announcing the results on Monday, Investcorp said the fee income from its client business activities increased by 14 per cent to $82 million and corporate investment asset-based income grew by 90 per cent to hit $65.4 million in 2011 compared to the previous year.

However, asset-based income overall was impacted by negative returns on hedge funds with the hedge fund industry worldwide experiencing drawdowns due to the turbulence caused by the Eurozone crisis, it added.

Commenting on the results, Nemir A. Kirdar, executive chairman & CEO, said, 'These results show strong underlying progress, clearly demonstrating that Gulf investors continue to favor alternative investment firms with a long track record of performance and whose expertise and commitment they trust.'

In another development, Investcorp announced its successful exit from Gulf Opportunity Fund I which had invested $98 million in Redington International Holdings, a leading distributor of IT and telecom products in the Middle East, Africa and Turkey, for a 26 per cent equity stake in November 2008.

Investcorp said it had signed a definitive agreement for the sale of Redington stake back to its Bombay Stock Exchange-listed parent company Redington India, which acquired the shares to regain complete control and ownership of its subsidiary.

'This sale will generate gross proceeds of $114.8 million (including $2.1 million in dividends already received) for the investors representing a gross $49.8 million capital gain, net IRR of 17 per cent and 1.7 multiple of their equity investment,' said Kirdar.

According to him, Investcorp’s client business in the Gulf continued to build on its momentum of the last three years following the 2008 crisis.

'In this six month period, Investcorp raised $735 million from investors, up 67 per cent from the $440 million raised in the first half of last fiscal year,' he stated.

Meanwhile, the period also saw healthy profit distributions back to investors, with $412 million being returned, following a distribution of $405 million in the previous first half period, he added.

Kirdar said despite economic pressures, the aggregate Ebitda from Investcorp’s US and European corporate investment portfolio at December 31, 2011, was up by 10 per cent over the previous year.

Besides, the operating expenses fell by 23 per cent to $64 million, due to reduced fixed operating expenses and lower variable compensation accruals in line with lower net income for the period, he noted.

Kirdar pointed out that the first half of the fiscal year ended December 31, 2011 had seen Investcorp's headline results inevitably impacted by the Eurozone debt crisis which dramatically worsened market conditions in the short-term for all asset classes, including the hedge fund industry.

'Investcorp’s business has ridden out this event during the first half and I am extremely encouraged by the strong exits we have made and by the growth in our fundraising activities,' he remarked.

Investcorp, he said, has closed four private equity deals in the Mena region since its launch in 2008, in Turkey, Saudi Arabia, the UAE and Kuwait.

"We had deployed $95 million in six new real estate investments, three of which were placed with clients in a Sharia-compliant portfolio, US Diversified Properties X Portfolio, and a fourth which will be placed in a future portfolio. We also acquired two debt investments," said Kirdar.

'Realizations and new investment from clients form a virtuous circle in alternative investments, and our performance on these key metrics shows we are on track as we move ahead to maximize the capacity inherent in Investcorp’s brand in the Gulf,' he added.-TradeArabia News Service