Investcorp stays cool on digital assets

Reuters/Benoit Tessier

• Wait-and-see approach
• Sector needs ‘time to mature’
• Crypto failures a warning

Investcorp, the Gulf region’s largest alternative investment company, will not be turning to digital assets to boost its bottom line in the short term.

The Bahrain company’s Abu Dhabi-listed Investcorp Capital invested more than $639 million in the first half of its financial year to December 31, 2023.

The company’s latest financial reports revealed a 47 percent increase in its capital financing services business and overall income of $34 million for the six-month period.

• Investcorp lines up diverse strategies for east and west
• Investcorp seeks more global airport and seaport stakes
• Gulf investors expected to bet big on bitcoin ETFs

Investcorp Capital is involved in five asset classes – private equity, real estate, credit management, strategic capital and infrastructure – across three continents.

Hazem Ben-Gacem, co-chief executive officer of Investcorp, said its 40-year history had earned them the reputation as a “cautious and measured custodian of capital” for investors.

He said the same qualities would be in play when it comes to investing in digital assets.

“Let’s give that sector time to mature and develop,” he said. “And I think once that is done, there is no reason why we cannot be an investor in that.”

Digital assets are a trillion-dollar alternative favoured by risk tolerant investors seeking to generate higher returns than traditional asset classes. 

Well established cryptocurrencies like bitcoin and ethereum have been joined by other options including non-fungible tokens and decentralised finance tokens, while the associated infrastructure has also developed, creating a wide variety of new investment choices. 

“In the short [and] medium term, I think we will just take a wait-and-see approach to the risk profile that comes with those digital assets. As such we would not be in a position to recommend it to our investors or for ourselves to invest capital,” said Ben-Gacem.

The failure of several crypto exchanges, most notably FTX, has shaken the cryptocurrency market.

FTX founder Sam Bankman-Fried was found guilty last year of stealing $8 billion in customer deposits from the now-bankrupt exchange.

Former Binance CEO Changpeng Zhao also pleaded guilty to breaking anti-money laundering laws as part of a $4.3 billion settlement.

The US Treasury Department said binance failed to report more than 100,000 suspicious transactions with terrorist groups including Hamas, al Qaeda and Isis.

Nevertheless, the US Securities and Exchange Commission last month approved the trading of 11 spot bitcoin exchange-traded funds, issued by global asset management companies such as BlackRock, Invesco, Grayscale, Fidelity and Franklin.