BMB’s acquisitions signal intent to expand horizons

Rayo Salahadin Withanage, the slick-suited, Brunei-based asset management boss cannot stay out of the headlines for long. But this goes with the territory. He comes from a colourful part of the world where polo-playing, oil-rich sultans have absolute power and royal brothers recently emerged from a legal battle over misplaced assets.

The Cayman Islands headquartered BMB Group, of which Mr Withanage is executive chairman, has just bought into Alliance Capital Partners to create a $4bn (€3bn) real estate capacity for Asian clients, with portfolios concentrated in the Benelux and North European regions.

This follows the acquisition of Contrarian Capital Partners – whose subsidiary Beacon Hospitality Partners SARL advises on assets for Gulf and Asian sovereign wealth funds – and Mr Withanage promises more to come. “Contrarian was just the start of our real estate drive,” he ventures.

The firm bought EMP Global, headed by former Pakistani Prime Minister Moeen Qureshi in 2008, giving it a stake in the growing emerging markets private equity business. BMB encourages wealthy European families to club together to buy into the new unit’s deals.

Young and impressionable

Mr Withanage hired Dr Humayon Dar and a five-strong Islamic investments team from Deutsche Bank in 2007, gaining a foothold in Sharia investing. “We were young and impressionable,” says the 32-year old entrepreneur of Sri Lankan descent. “We would not do that again.”

The BMB Group no longer discloses the size of its managed assets, believed to be upwards of $10bn and rising. “Further acquisitions are expected in real estate and money management,” reveals Mr Withanage, describing private equity, the Islamic space and advising wealthy families as his positions of strength.

While the BMB Group began life in 2004 as the investment office of the Brunei royal family, and also runs money for Gulf royals, Mr Withanage both plays down regal connections and admits he owes these families his undivided loyalty. That said, the group is moving into multi-family office territory.

“We only manage a tiny slither of royal money, but for the foreseeable future, we will stay with existing investors and do our best for them,” he says. “We are not a mass market player. We are bringing investment managers to a small common market – it’s about long-term loyalty to our clients.”

This market is expected to broaden as Islamic investing gains popularity in Asia. “A lot of investors and stakeholders like to see Islamic leadership, but we like to service the wider investment community,” states Mr Withanage. “There’s a good chance Islamic finance might become something more mainstream, but that’s more in the future.”

It is vital for the Islamic industry to provide investors with solutions which always benefit society, he believes. “Islamic investing has to be more than just a rubber stamp which gives Muslim investors preferential access to the next IPO,” he says, seeing the role of Sharia products developing within the socially responsible and ethical investing sphere.

“Education is such an important part of the Islamic finance agenda, because it’s not just about a religion, it’s not about dogma, but vetting a fund along guidelines for ethical and social investing. If other religions decide to choose similar arrangements, this movement could determine the future of investing.”

While the BMB Group manages most of its funds directly in the alternatives space, Mr Withanage prefers to use BMB Islamic to create products for other banks and wealth managers. Links with banks in London are also being forged. “We like to work with existing Islamic firms, helping them to reach the highest level of Sharia compliance in a way that is ethical,” he says. “We are the product kitchen and we want to make good products which both Islamic and other investors are proud of.”

A number of Islamic finance centres will gain prominence on the world stage, he believes, with a dominant force unlikely to emerge. “Bahrain was one of the earliest to be established and Saudi Arabia has a Sharia-compliant legal system. Qatar and Kuwait are there too. It is better for the industry if there isn’t a single global Islamic centre.”

He also expects Dubai to bounce back from its debt-induced crisis, which led the previously fast-expanding Emirate to go cap-in-hand to Abu Dhabi, its senior partner in the UAE federation. “We will certainly see that Dubai has leadership in its vision and infrastructure, that will be very difficult to challenge in many areas,” he says.

There is little doubt for Mr Withanage that growth in the East will remain the powerful driver behind his clients’ interests. “If there is one thing the Chinese have shown they are masters at, it is managing sustainable growth. Both growth and retraction are equally destabalising. China knows how to manage success and a lot of other countries can learn from this. The way South East Asian companies have survived the global recession has also surprised the world.”

Despite his own sometimes brash entrepreneurial profile, Mr Withanage often refers to his respect for business colleagues and royals with heart, modesty and wisdom. One of these is Pehin Aziz, credited with improving transparency at the turn of the decade. This followed the BIA scandal, in which the Sultan of Brunei’s brother, Brunei Investment Agency boss Prince Jefri – who lived an extravagant lifestyle, owning hotels, yachts and supporting multiple wives and children – was alleged to have misappropriated $14.8bn.

Mr Aziz was made director of the BIA in 1998 and headed the investigation into the missing billions.

“Prior to Brunei’s independence in 1984, Pehin Aziz was Chief Minister of Brunei. Following independence, he held a further 13 ministerial positions and is one of the most respected and responsible statesmen we have. He was director of the Brunei Investment Agency and gives us great understanding in how do deal with sovereign and government investments,” says Mr Withanage.

“We are a young group and we have done as good a job as we could have. But we also have respect for age and experience.”

With such influences, Brunei is fast becoming a “pan-Islamic, Eastern phenomenon,” with a future serving the investment needs of both China and the Middle East, claims Mr Withanage. “We don’t have operations in Brunei apart from His Highness’ and Pehin’s private offices. Our future and our present lies in other places.”

From Fiji to Brunei via Bermuda and New York

Rayo Withanage was born in the Fiji Islands and lived in Bermuda and New Zealand before settling in Brunei Darussalam, a country located on the north coast of the island of Borneo in South East Asia.

A lawyer by trade, Mr Withanage worked in private equity in the US and Latin America before founding the BMB Group with his old friend and fellow polo player, H.H. Prince Abdul Ali ’Yil-Kabier, a senior Brunei royal from the house of Bolkiah. It is difficult to draw Mr Withanage on his roots or the inspiration of his business empire, but he admits that his attachment to “Brunei has been an important part of my professional development,” his family having moved there in his early teens.

“Working in a country located between the Middle East and East Asia is a very privileged place to be,” he says, often helped by the fact that Brunei is off the beaten track, so usually out of the limelight. “One market is the dynamo of the world’s natural resources and the other is its biggest consumer,” he says.

Dateline

2004 BMB Group founded by Rayo Salahadin Withanage and His Highness Prince Abdul Ali ’Yil-Kabier in Brunei Darussalam as investment office for ultra high net worth individuals including Brunei Royal Family

2007 Dr Humayon Dar and team of five Sharia investment specialists hired from Deutsche Bank to form the BMB Islamic franchise, now used to develop investment products for third party banks

2008 Acquisition of EMP Global to widen product range for Asian clients to include emerging markets private equity capacity

2010 Purchase of real estate investment groups Alliance Capital Partners and Contrarian Capital Partners, with further acquisitions promised

Rayo Salahadin Withanage, The BMB Group