The fact that Gulf investment funds and Western private equity firms are getting together should be no surprise. They are like long-lost relations that share strikingly similar traits: they are awash with cash, boundless in their ambition and self-belief, jealous of their privacy and disdainful of transparency.

No wonder that another deal was done yesterday between the sheikhs and the Masters of the Universe: Dubai International Capital bought a 9.9 per cent stake in Och-Ziff. This follows Abu Dhabi funds buying sizeable minority shares in Carlyle and Apollo Management.

It is tempting to think that the Arab investors are being gulled. Certainly, they are paying full prices for their interests in these firms. But it is precisely to avoid making investment mistakes that these Gulf buyins to the big leveraged buyout firms make such sense. In Dubai, intelligent fund managers worry about what they call “adverse selection”.

The concern is that the world sees the Gulf as fools easily parted with their fortunes. They worry that people selling investments bring the ones that they couldn’t sell elsewhere to Dubai and Abu Dhabi. As one financier here put it: “Every crummy deal in the States comes here.”

But by buying into the likes of Och-Ziff and Carlyle, the Gulf funds are not only getting a transfusion of world-class private equity expertise. They are getting a window on the most sought-after and interesting deals in the world. They may be paying a little more than they should for the privilege, but they get to neutralise adverse selection. Better yet, they get to skip a stage in the Darwinian process of business.

james.harding@thetimes.co.uk

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