Dubai International Capital (DIC), the $12 billion (£7.8 billion) Gulf investment fund, has confirmed that it is turning its focus away from Western acquisitions to concentrate on local and emerging markets.

Sameer al-Ansari, the chairman and chief executive of DIC, said that the balance of economic power was shifting east and that the fund’s investments would follow.

DIC has been active in Western stock markets since it was founded in 2004 and has built large stakes in HSBC, Daimler and EADS, which owns Airbus.

DIC, which is indirectly owned by the Dubai Government, also bought Travelodge, the hotel group, for £675 million in 2006 and Madame Tussauds for £800 million in 2005.

Last year the fund had 47 per cent of its assets invested in Europe and a further 22 per cent in North America but it will now rebalance the portfolio to give greater emphasis to the Middle East and Asia. Its decision will be a blow to companies and investment bankers hoping that the Middle East might provide much-needed financing.

Gordon Brown was in the Gulf this month to encourage the region’s sovereign wealth funds to invest in British companies and also to support international institutions such as the IMF and World Bank.

Barclays secured a £6 billion investment from the Qatar and Abu Dhabi ruling families last month in return for a 30 per cent stake in the bank, but this type of capital-raising may become more difficult as Gulf investors turn away from Western markets.

Mr al-Ansari said: “Emerging markets are less indebted so their recovery could be faster than the developed markets. We in the Middle East can and should play a central role in this power shift.” DIC is understood to have made only two acquisitions this year because of turbulence in world stock markets and both were in emerging markets.

It bought a 45 per cent stake in KEC, a local oil engineering company, and it also acquired True Group, a Singapore-based spa and yoga chain. DIC plans to roll out True spas across Asia and the Middle East and opened its first store in India this week.

The fund does not expect to make any significant investments in Europe and North America during 2009 despite numerous offers from investment bankers looking to raise capital for beleaguered companies. This could be bad news for fans of Liverpool Football Club as DIC has been linked with a possible bid for the club.

The Dubai fund was close to acquiring Liverpool in 2006 until George Gillett and Tom Hicks, two American financiers, swooped on the club. Mr Gillett and Mr Hicks are thought to be looking for a buyer before they must refinance the £350 million debt they took on to buy the club.

A number of other Gulf investment funds are also refocusing on local markets after the turbulence on Western bourses.

The Kuwait Investment Authority recently repatriated $4 billion from Western markets to buy stock in its own exchange as part of a move to support local companies. The Qatar Investment Authority has also begun investing in local banks and even the Abu Dhabi Investment Authority, the largest sovereign wealth fund in the world with assets of over $700 billion, is rumoured to be changing the direction of its portfolio.

This is a significant change in strategy for the Gulf’s investment funds as they have deliberately sought to buy Western companies and shares believing that it diversified their risk and added stability to their portfolios.

However, many have seen the value of their investments fall dramatically, particularly those that have put additional capital into banks such as Citigroup, Merrill Lynch and UBS.

Samba Financial Group, a Saudi Arabian bank, said that the Gulf’s wealth funds were likely to lose about $190 billion this year, effectively wiping out the benefits accrued from the high price of oil. Mr al-Ansari said: “The balance of economic power is shifting towards emerging markets and rapidly to the developing East. Some of these markets are poised to enjoy significant growth over the next 20 years, especially after the shake-up in the financial system in the West.” Commentary, page 61

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