2021 Third Quarter Commentary

Arif Naqvi liked to say, “Today’s peacock is tomorrow’s feather duster”, an apt phrase for a man who was once an impact investing celebrity, targeting social equity and economic growth in emerging markets.  He was charming, generous, attractive, but also bullying and narcissistic.

Naqvi’s hedge funds, foreign entities run out of Dubai, became the Middle East’s largest.

Investors included the Gates Foundation and World Bank.  If Bill Gates is investing, others thought, they should, too.

The funds had been audited and favorable opinions issued.  Despite this, as private funds, and this is a very important point to be aware of, the funds’ fraudulent financial practices were hidden from investors for years.  Private funds lack the heightened oversight and financial controls of publicly regulated entities.

Naqvi, with his connections to the rich and politically powerful, his 154 foot super-yacht and along with his fellow fund managers pocketed the funds’ cash in secret bank accounts.  Turns out, investors eventually noticed they had been duped.  The Gates Foundation raised questions.  Wall Street Journal journalists Simon Clark and Will Louch dug in.  Whistleblowers came forward.

Give me your money to invest, Naqvi said, and we’ll reduce poverty and improve public health.  Instead, he has been charged with stealing $780 million.

The takeaway here is that, even when a fund’s purpose is noble, be diligent and trust, but verify.