On the Go

You have made successful investments around the world in recent years. What overall approach do you take in investing abroad, and how would you characterize the current investment environment in emerging markets?

At KBW, we invest in a diverse array of businesses around the globe, from established businesses in the construction industry to promising technology start-ups. The key is to select investments that align with the changing needs of a particular region. KBW was born out of the recognition that synergies do exist between diverse companies, and their growth can be greatly enhanced if their efforts are synchronized. This is true in both established and emerging markets. At the same time, I learned from my father to invest in companies that matter, looking particularly for those with a solid history and/or clear vision for the future. And of course, I invest in companies that I feel passionate about.

The Brazilian market has been of particular interest to you, although some investors have retreated from the country over the past three years. How do you see the country’s prospects over the next five years, and what sectors do you see as most promising?

I’ve studied the Brazilian market closely over the past two years, and in that time have seen an increasing role for the private sector, particularly related to infrastructure projects. For Brazil to continue growing, it will need to invest in infrastructure such as railways, highways, and ports. That’s why we have chosen to focus specifically on infrastructure projects, as well as oil and gas, logistics, and mining. In Brazil, I see the most promise in services that are pegged to the US dollar, such as oil and gas, and with product prices that are defined by international markets, such as commodities. As one example, KBW has invested in a $430 million infrastructure complex, namely Petrocity Portos S.A., which will serve the oil industry in Brazil and is based near one of Brazil’s large new oil-producing areas. We have also supported Royal Minerals, which explores for iron ore, gravel, and granite, and Arcadia Engenharia do Brasil, a construction and engineering firm. Importantly, as we invest in Brazil, we are working closely with local and regional governments to understand what they need from the private sector. For instance, during my last visit to Brazil, I met with local and regional governments in Espirito Santo and Santa Catarina, where KBW’s South American head office will be located. We had a firsthand look into what Brazilian local governments would like to see from the private sector, particularly in terms of private-public partnership (PPP) initiatives.

KBW Holding has recently acquired Italian crane maker Raimondi. How will you develop that investment over the coming years?

This investment is a response to the tremendous growth potential I see ahead for both Brazil and the Middle East, Africa, Australia, Kazakhstan, and Russia. KBW is working with Raimondi Cranes, a 150-year-old Italian crane company, to set up a manufacturing unit in Brazil, Saudi Arabia, India. and Malta. These are regions of the world where we are seeing an explosion of construction, and as we know cranes are vital to that construction and ultimately to building new economies.

Saudi Arabia is showing very strong GDP growth and is investing billions in infrastructure and services. What ambitions do you have for the Saudi market?

One of my greatest ambitions is to see this next generation realize its full potential and entrepreneurial promise. The young people of Saudi Arabia hold the keys to our future—but we must help them channel their creative energy in effective ways. Start-ups provide the energy, vitality, and dynamism essential to any growing economy. By supporting them, we can help bring greater opportunity to the youth of Saudi Arabia—and in turn, help their success become the country’s success. Investing can help, but we also need to work together to build a supportive environment that sets innovative thinkers up to succeed. That means making it easier for start-ups and budding entrepreneurs to be creative, to start new companies, and even to fail sometimes in the process. For example, the King Abdullah Scholarship is vital to helping entrepreneurs succeed. However, the vision that King Abdullah and his advisors have for this amazing program needs to be supported with actual opportunities for young graduates to go out and stand on their own two feet, instead of being chaperoned constantly. They need the opportunity to try, and even to fail, in the real world. You only learn from your mistakes.

Where do you hope to see KBW Holding in five years in terms of its size and portfolio?

A private equity portfolio consisting of the assets of a variety of different companies has many variables that impact the overall result, so this is not an easy question to answer. Simultaneously, there are a number of decisions that will impact our size. For example, something we are discussing within the firm is whether or not to accept new investors. It’s a decision that will inevitably bring changes, specifically in the regulatory aspect. So time will tell, but suffice it to say I am confident about our future.

© The Business Year – June 2014