Libya sets up London hedge fund to train financial experts

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The Independent Online

The Libyan government is backing a new London hedge fund with hundreds of millions of dollars, as the Arab state seeks to diversify its economy away from oil and train a generation of investment professionals in the ways of the financial markets.

FM Capital Partners has been hiring staff at its offices in Knightsbridge, has applied for registration with the Financial Services Authority and plans to launch later in the summer.

The hedge fund will be run by the former Merrill Lynch and Bear Stearns trader Frederic Marino, with a board that includes luminaries from Libyan diplomacy and its sovereign wealth funds.

As well as managing money on behalf of funds linked to the Libyan government, it will also offer a training scheme for professionals from the north African state's nascent finance industry and sovereign wealth funds. Mr Marino was in Paris yesterday recruiting academic mathematicians to teach in the programme, which will be a mix of classroom training and hands-on trading experience at the fund.

"What we are developing is not just an investment fund," he told The Independent. "What we will give back to our clients is not just the returns on their investment that we generate. This is also about the transfer of investment technology and creating a generation of people who, in four or five years, will have a good level of technical international financial knowledge."

FM Capital was quietly established almost a year ago, according to documents at Companies House, and has managed to stay out of public view as it builds a team of traders and analysts. Mr Marino said it hopes to have more than 40 staff by the autumn. Directors include Mohamed Taher Siala, who has been Libya's deputy foreign secretary, and Khaled Kagigi, who runs a Libyan government fund that invests in Africa.

FSA records show that Mr Marino, 43, transferred from Bear Stearns to JPMorgan after the bank's collapse in 2008. He was earlier head of the fund-linked products group at Merrill Lynch. Also on the FM Capital board is Aurelien Bessot who, like Mr Marino, worked for the Dutch firm Rabobank in the early 1990s.

The size of the new hedge fund will be determined only in the coming weeks, depending on commitments from different sub-funds under the Libyan government's control, but is expected to total several hundred million dollars. Mr Marino said it would also start to seek to manage funds from other Arab governments.

FM Capital's activities will be split among a range of traditional hedge fund strategies, and it is also establishing a research team that will focus on investment opportunities and due diligence work in Africa.

"A lot of people are showing interest in Africa and economies there are showing double-digit growth," Mr Marino said, "but while a few investment banks have developed business in Africa there is room for us to work with the Libyan Africa Portfolio to support investment ideas."

FM Capital's Libyan government backing comes from funds independent of the Libyan Investment Authority, its biggest and most aggressive sovereign wealth fund, which last week revealed itself as the third-largest shareholder in the FTSE 100-listed publisher Pearson, owner of the Financial Times.

Four decades after the coup that brought Muammar Gaddafi to power, Libya has been forging business links with the rest of the world following the lifting of sanctions in 2003, although links have remained tentative because of the memory of the regime's support for terrorism.

Mr Marino said: "We are not doing any politics. There is a lot of business being done with Libya today. Large UK, French and Italian companies are doing business. Investment banks in the UK and the US have been doing business with Libya for three or four years. What happened in the past does not reflect what is happening now."