US Private Equity Company Andalusian to Open First Global Office in UAE by Early 2025
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- 20 Nov 2024
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Andalusian Private Capital, a US-based private equity firm, is set to establish its first global office in the United Arab Emirates (UAE) by early 2025. This move aims to capitalize on the region's growing private loan market and the increasing liquidity available for investment in emerging asset classes, particularly private credit.
The New York-based Andalusian Credit Partners, which is backed by hedge fund manager David Tepper, has already initiated discussions with potential investors in Abu Dhabi to explore long-term partnerships and capital agreements. With approximately $500 million in assets under management, the firm is keen to establish a permanent presence in the UAE, leveraging its location to access markets across the Gulf Cooperation Council (GCC) and the broader Middle East.
Aaron Kless, managing partner and chief investment officer of Andalusian Credit Partners, emphasized the importance of building partnerships rather than engaging in transactional relationships, which aligns with the investment culture in the region. The firm is looking to secure long-term contracts ranging from three to ten years, although specific deals and investment amounts have not been disclosed.
Andalusian is currently evaluating whether to set up its UAE office in the Abu Dhabi Global Market (ADGM) or the Dubai International Financial Centre (DIFC). Kless noted that the firm has been in active discussions with UAE regulators, particularly at ADGM, to align its operations with fundraising objectives and deal flow.
Founded two years ago, Andalusian manages over $2 billion in commitments, with its credit platform launched last year focusing primarily on the US middle market. The private credit market is experiencing rapid growth, projected to expand from $875 billion in 2020 to $2.3 trillion by 2027, according to Morgan Stanley. This growth is driven by traditional lenders, such as banks, retreating from the market due to tighter lending restrictions, creating opportunities for private credit providers.
Private credit has become increasingly mainstream, financing approximately 86% of leveraged buyouts (LBOs) last year, as reported by Pitchbook. Interest in private credit has surged, with Google searches related to the topic quadrupling over the past year, indicating a growing awareness and demand for these investment opportunities, particularly in emerging markets like the UAE.
Andalusian is not alone in its pursuit of the UAE market. Other firms, such as Golub Capital, a $60 billion direct lender, are also planning to establish a presence in the region to tap into the deep pool of liquidity and diversify their investment portfolios. The Abu Dhabi Investment Authority (ADIA) and Mubadala Investment Company are increasingly investing in private credit, further highlighting the region's potential as a hub for alternative financing.
Kless described the UAE's direct lending market as still in its early stages, suggesting a significant shift from traditional banks to non-bank and private lenders, similar to trends observed in Europe and the US over the past 15 years. The firm aims to gauge the UAE's appetite for US investments while also exploring opportunities for regional investments as it establishes its presence.
Roger Ferguson, chairman of Andalusian Credit Partners and former vice chairman of the US Federal Reserve, noted that the UAE has emerged as a major global financial hub. He emphasized the importance of being on the ground in the region to understand the investment climate and the preferences of local investors regarding US exposure.
As Andalusian prepares to open its office, it plans to return to the UAE in mid-December for further discussions during Abu Dhabi Finance Week, continuing its efforts to build relationships and understand the local market dynamics.
