THE rise of Abraaj is a story of daring investments and meteoric growth. Its downfall has been faster still. What took a little more than a decade to build is crashing down in less than 10 months. The fund grew from a small, family-run and family-invested enterprise in the early 2000s to a $15bn investment vehicle largely on the back of shrewd, carefully calculated and very high-risk bets in some of the riskiest markets in the world. Its latest move into impact investing in health and education showed that its top management, led by the tireless Arif Naqvi, could see the future through the thickest fog. But the growth story, it turns out, was built on very delicate foundations. These foundations were a set of relationships that Abraaj built with investors and creditors over the years, delivering spectacular returns along the way to both. Investors and creditors are fickle birds, though, easily spooked and given to flight in a moment.

That is exactly what happened to Abraaj. What began as a dispute with one class of investors grew rapidly into what some reports called an ‘investor revolt’, and ‘provisional liquidation’. Through it all, it is important to note that nowhere has the fund been the target of any government action, whether regulatory or law enforcement. It fell apart under the weight of its own relationships and commitments. Somewhere through the whole drama, a line has been floated that Abraaj’s investments in K-Electric, Pakistan’s largest integrated power utility in which the fund acquired a controlling stake 10 years ago, but from which it has struggled to effect its exit, was the reason for its downfall. This line must be resisted. The liquidity constraints created by the delays in the KE exit did not help the matter, but it is a far cry to suggest that they caused the difficulties that led to Abraaj’s filing for liquidation. Those problems stemmed from a corporate culture of weak internal controls, lax regulatory oversight, and nontransparent jurisdiction in which Abraaj operated, as well as the somewhat imperious style that Mr Naqvi is known to have adopted in his dealings with others. In other times, these might have been sources of strength for the fund, but in bad times they quickly became its weakness, and there ended its story.

Published in Dawn, June 21st, 2018