It is no secret that limited partners like sovereign wealth managers and pension funds have been increasingly seeking to deploy capital on their own in recent years, as opposed to paying fees for others to invest on their behalf.
Mubadala, a United Arab Emirates wealth fund, is one example of a limited partner flexing its muscles to transform itself into a significant GP.
The Abu Dhabi state fund, which is an anchor investor in SoftBank‘s debut Vision Fund, has worked for years to lay the groundwork for more direct investing. Now as that capability comes of age, the firm is increasing the speed and scope of its direct investing.
Mubadala participated in 157 direct investments in 2021—up from just 45 the year prior—spanning buyouts, growth equity investments, seed investments and early- and late-stage VC, according to PitchBook data.
This year, even as uncertainty roils the markets, Mubadala isn’t letting up. The firm has participated in 151 deals buying direct stakes in businesses so far this year, including tech startups and infrastructure companies, PitchBook data shows.
As the sovereign wealth fund matures and gains experience from its relationships with external managers including SoftBank, its transition to a more active investment role and increasing involvement in direct investments makes sense, said Daniel Brett, the head of research and data at Global SWF.
Acting as a GP allows the sovereign investor to attain better yields instead of seeing its profits eroded by management fees and carries, and it also helps to strengthen Abu Dhabi’s soft power and bolster the nation’s business ties with other countries, Brett said.
“The moves are due to its own desire to become a more mature, proactive and diverse investor,” he said.
Mubadala, through its asset management arm Mubadala Capital, originates and syndicates investments directly, and that sets it apart from many other sovereign investors who may rely on their GPs to source deals and conduct due diligence, according to Alaa Halawa, executive director and head of US ventures for Mubadala Capital, which was launched in 2011.
“The majority of our business that we build on the ground is thesis-driven, original and our own origination of deals. We lead deals. We syndicate deals. We sit on boards,” he said.
Mubadala has previously made direct investments in businesses or co-invested alongside other fund managers. It backed companies like Hollywood talent agency and media company Endeavor and Alphabet’s self-driving car unit Waymo, as well as Jio Platforms, a provider of internet services in India.
However, the firm’s pace of acquiring direct stakes in companies has grown in pace and scale in the last two years, PitchBook data shows. The increasing activity follows a string of moves made to fulfill the sovereign investor’s ambition of doubling the size of its assets to half a trillion dollars by 2030. Starting in early 2021, Mubadala organized its business to focus on four areas: direct investments, UAE investments, disruptive investments and real estate and infrastructure investments, Bloomberg reported.
Mubadala has been taking steps to build out its investment capabilities, including enlisting talent to staff up its in-house investment team in U.S. and Europe. This year, it made several new hires with different expertise, poaching from Summit Partners, HIG Capital and Viking Global Investors, according to information on LinkedIn.
Mubadala Capital last year laid out plans to add more professionals at its London and New York offices in a bid to boost its private-equity strategy. The moves came as Mubadala Capital wrapped up its third private-equity fund, MIC Capital Partners III, at about $1.63 billion, including commitments from BlackRock and other institutional investors.
It also makes an effort to partner with other emirate’s sovereign funds for new ventures. This year, Mubadala-backed AI and cloud-computing firm G42 launched a $10 billion fund, in partnership with Abu Dhabi Growth Fund, to invest in late-stage tech companies in emerging markets.
The investor favors buyout deals, which account for the largest portion of all its PE and VC deal types tracked by PitchBook. It has co-invested with private-equity giants in a number of noteworthy deals, including EQT‘s acquisition of Swedish medical-freight provider Envirotainer and Warbug Pincus‘ deal to buy Informa’s Pharma Intelligence.
Mubadala also has been active in venture capital, taking stakes in companies such as Turkish grocery delivery startup Getir and Swedish buy now, pay later company Klarna. In another example, the firm led an investment in digital insurer Wefox, joined by a mixed group of venture capitalists and fund managers.
Its San Francisco-headquartered VC team is marketing a second core fund and a European-focused vehicle, according to Halawa. He declined to disclose the target size for the two new funds but said the firm has made more than 40 investments out of these funds.
Mubadala managed 1.045 trillion UAE dirham (around $284.5 billion) in assets at the end of 2021. Its investment arm Mubadala Capital has $13.7 billion in AUM, including third-party capital, according to a document that reports the manager’s 2021 financial results. In total, Mubadala Capital manages about $10 billion in third-party capital, said Waleed AI Mokarrab Al Muhairi, the deputy group chief executive officer, in a promotional video on the firm’s official YouTube account posted in May.
Marina Temkin contributed to this report.
https://pitchbook.com/news/articles/mubadala-direct-investments-sovereign-wealth-fund
