Monday, August 9, 2010

DIFCI to Divest Non Core Assets and Assure Robust Streams of Liquidity

Photo Jimmyjazz Released to Public Domain
 
Today's Gulf News carried a report that DIFCI had decided to get rid of its non core assets.  It has some US$1 billion of them.  Some of which are pictured above.

In the words of Shahli Akram, Acting Managing Director:
"DIFCI may divest certain of its investment portfolio to create robust liquidity streams across the business, whilst maintaining very strong focus on augmenting returns from our core business lines and also creating operational efficiency across the board," he said.
There's a lot of this going around lately.  Sort of like SARS.  The GCC is beginning to look like a US suburb with all the jumble and yard sales going on.  Adnan and  Ms. Maha up in Kuwait -  are selling so many "non core" assets that in three to five years they may have no assets left.  Not a one.  A Pretty fellow in Bahrain with a load of non core assets - real estate focused.  And now even DIFCI.

Ever wonder how a competently managed careful firm gets loaded up with non core assets? 

Well, Abu Arqala has a theory based on his experience at the university.  I had a friend let's call him "Sam".  Sam had a legendary refrigerator.  It all began innocently enough.  A clean refrigerator.  Some food items - fruit, vegetables, etc.  Over time these were augmented with left over pizza, Chinese food..  As new items were added, the old ones were all pushed further and further to the back until a critical mass and pressure sufficient for a chain reaction occurred.  One month thereafter,  some of the fruit had  developed whiskers - stubble to be sure, but growth nonetheless.  At two months, the Chinese food eyes.   At three months the pizza a proto hand or claw.  After 9 months, many swore they could hear vague stirrings from deep within the  refrigerator - nameless unthinkable shapes moving at night.  After 18 months, voices were heard. but in an unknown guttural language.   A new form of  life had been created.  After a while, the door was kept closed.

At the 24 month mark, during one summer, a "roomie" temporarily subletting opened the refrigerator.  A hardy soul not particularly prone to squeamishness he took charge of the situation.  Robust liquidity streams were mopped up from the floor.  And in some cases scraped from the interior.  Most of the non core assets were disposed of, except for one legendary orange with a long black beard that eluded capture.   They say (and who am I to doubt them) that it has until today and that if one listens carefully, its plaintive cries can still be heard at night. 

I'm guessing the same sort of thing happens in the financial world.  One starts with a collection of perfectly good assets.  New assets are added to the portfolio pushing the earlier ones to the back.  As they sit  there, some of them begin to fester.  Soon infecting others,  Before you know it, you're loaded up with non core assets.

One can well imagine how Shahli feels having opened DIFCI's rather large refrigerator.

8 comments:

Laocowboy2 said...

There are two sorts of investment - "Tactical" and Strategic". Those termed "Strategic" are all too often tactical investments that went wrong. And DIFCI was a very strategic investor indeed.

Chapter 11 said...

I believe it's Shahli Akram, not Shahil - my 2 cents (on the dolalr) for the day.

Chapter 11 said...

Seems as though there's fungus growing on my fingers too.

The Rageful Cynic said...

lovely story :)

so appropriate in these trying times...

Abu 'Arqala said...

Chapter 11

Thanks for the eagle eye spot on Shahli. Now corrected.

That's how it starts.

Soon Suq Al Mal will have to hold a sale of its non core blog posts which will no doubt just serve to reaffirm our proven business model here.

Abu 'Arqala said...

Laocowboy2

I've heard it said that there are four types of investments.

Smart and stupid (at origination).

Successes and failures (thereafter).

3li said...

Moody has downgraded them too... Anyone feeling optimistic?

Abu 'Arqala said...

Anonymous

Adnan AlMusallam up in Kuwait.