The fund will be overseen by the Supreme Council for Financial and Economic Affairs and managed by the Abu Dhabi Department of Economic Development (Added), the Abu Dhabi Government Media Office said on Tuesday.
The IPO fund will invest in five to 10 private companies a year, with a special focus on small and medium enterprises, and will aim to have ticket size of between 10 and 40 per cent of the float.
“The Abu Dhabi IPO Fund will incentivise more private companies, including SMEs, to list, by providing liquidity and by building additional confidence around IPOs through encouragement of additional private sector investment,” said Mohammed Al Shorafa, chairman of Added and ADX.
“It will also promote a shift from relying on debt financing to fostering a greater use of equity instruments.”
ADX is the second-biggest exchange in the Arab world after Saudi Arabia’s Tadawul. The exchange, which is owned by state holding company ADQ, said this year it planned to double its market capitalisation over the next three years through its new ‘ADX One’ strategy that aims to increase market liquidity and improve market efficiency.
The Abu Dhabi stock exchange has seen record trading performance this year, with its market capitalisation rising beyond Dh1.4 trillion. It is among the best-performing global bourses, with its benchmark index gaining more than 51 per cent since the beginning of this year.
The exchange has attracted various high-profile listings in the last few months, including those by Al Yah Satellite Communications and Adnoc Drilling. Abu Dhabi Ports Company, which operates ports, industrial cities and free zones in Abu Dhabi, is also expected to list before the end of this year.
The new IPO fund will work closely with banks to help companies through their listing process and will aim to add additional capital from private co-investors.
The fund and private co-investors will hold the shares post-IPO for a reasonable period of time, the Government Media Office said.
“By deepening financial markets and promoting an investment culture across the UAE’s economy, the launch of the Abu Dhabi IPO Fund will further strengthen ADX’s position as a leading stock exchange,” Mr Al Shorafa said.