Should You Invest in Uncertain Environments?

Investors are in the business of navigating risk and reward. Assessing timing, market conditions, competition, and impacts of technological changes is always a challenge. For those investing in the Middle East, you can add war, political turmoil, and swings in the price of oil. Can assessments of a leadership team or projected earnings hold up when uncontrollable external factors have so much power to make or break a business?

For a time, investors were finding more and more reasons to invest in the region. Foreign investment in the Middle East and North Africa grew more than tenfold, from $8 billion to $126 billion, between 2001 and  2007, according to World Bank data. Then the financial crisis devastated cross-border investing around the world. By 2011 other developing regions had recovered, surpassing previous peak investment inflows—but just as the investing environment improved, the Arab Spring swept across the Middle East, bringing a new wave of uncertainty. By 2015, foreign direct investment had fallen to $51 billion.

Hani Al-Qadi, CEO and general manager of the Amman-based Arab Jordan Investment Bank, discussed his approach to investing in challenging environments in a conversation with Yale Insights. A veteran of more than a quarter century of investment banking in the Middle East, he recommends selecting deals that are fundamentally strong and then requiring enough of a risk premium to be able to ignore the external uncertainties. For those willing to invest for the long term, he’s seen “phenomenal” returns.

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