Egypt-based EFG Hermes, one of the region's largest investment banks, has attracted strong support for a Syria-focused private-equity fund and is aiming to close it by mid-2011. The fund will be registered offshore and will operate through a wholly owned affiliate in Syria, which will invest mainly in existing local companies seeking capital and management input to enable them to expand. EFG Hermes is aiming to raise US$250m for the fund.

EFG Hermes announced the launch of the fund in March 2010 in Damascus at the inauguration of a joint-venture investment company, whose local partner is the MAS Economic Group, headed by Firas Tlas, a prominent Syrian businessman. EFG Hermes Syria is established under the capital market law, and has licences to provide advisory, corporate finance, brokerage, research and asset-management services, according to Hazem Badran, its chief executive. The law sets out minimum capital requirements for obtaining licences for these activities, which, in the case of EFG Hermes Syria comes to about US$6m-to obtain the full range of licences from the Syrian Commission on Financial Markets, the total minimum capital requirement is US$17.5m. In mid-2010 the government passed a separate law for the establishment of investment banks, requiring paid-up capital of US$435m for a comprehensive licence including project finance and direct investment in other Syrian companies. No banks have yet sought to obtain a licence to operate under this law, probably reflecting reluctance to commit such a high level of start-up capital.

The EFG Hermes affiliate that would act as the vehicle for the private-equity fund will be established under Investment Law 8, which came into force at the start of 2007 and which covers most economic activities (although not tourism). Several companies in various sectors have already been identified as investment targets. Other investors are also considering the private-equity approach to Syria, including the Gibraltar-based Syria Rising Fund, which is aiming to raise US$100m.