Market Overview

The global financial crisis, which struck in 2008, and seems to abate more recently, has shaken investors’ beliefs in capital markets and the banking system as a whole. Assets mispricing, the deathtrap of subprime obligations, and the epidemic of moral hazard at large money center banks have all led to a retrenchment of capital. Stocks were hammered, bonds –whether corporate or sovereign- offered modest alternatives, while real estate stagnated and commodities went on an unpredictable course. The fundamental tenet of efficient market theory that existing share prices always incorporate and reflect all relevant information was simply out of synch with market reality.

Compared to developed markets, the unsophisticated financial system of developing economies were an advantage to investors. Emerging markets did not witness the financial bloodbath of large bank failures, toxic assets, and corporate shut downs that plagued more advanced economies. The impact of the global markets’ crisis on emerging markets severely affected investors’ sentiment but not market fundamentals. Strong volumes of domestic demand, lower levels of sovereign and corporate debt, and natural resources supported the relative immunity of emerging economies and investments.

At such time of crisis, Growthgate Capital saw the opportunity to deploy capital into promising and growth-oriented businesses operating in the GCC and other select markets of the MENA region. Throughout the period from 2008 to 2010, and beyond, Growthgate Capital, as a private equity firm, directly invested along with entrepreneurs and family business owners into varied companies. This was made possible because our ‘buy & build’ strategy that targets middle market businesses is firmly based on fundamentals not on market trends. We invest- at all times - in companies that show tangible signs of our ‘3M’ litmus test: Managerial talent, Model resilience, and Market focus.

A Winning Model
Market Conditions
Middle Market