The decision of Abu Dhabi sovereign investors Mubadala and ADQ and the Royal Group conglomerate to back SoftBank executive Rajeev Misra's new US$6 billion multi-asset investment fund shines a light on the Emirate's internal dynamics in a post-Khalifa era.
Sheikh Tahnoon bin Zayed al Nahyan, the UAE’s national security adviser, chairs ADQ and the Royal Group, while Mubadala is chaired by his brother, Sheikh Mohamed bin Zayed Al Nahyan (colloquially known as MBZ), who was recently installed as the ruler of Abu Dhabi and president of the UAE following the death of Sheikh Khalifa in May. They are members of the so-called “Bani Fatima six” in reference to their mother - and it's no coincidence that all three investment groups are backing the same man.
Misra is the architect of SoftBank’s US$100 billion Vision Fund, which received most of its backing from Mubadala and Saudi Arabia’s Public Investment Fund (PIF). The Financial Times reports that Misra has reduced his activity and cut back his roles in SoftBank’s operations to focus on the new venture. He has also stepped down from his role as chief of SoftBank Global Advisors, which manages the Vision Fund 2, but will continue to oversee the first fund.
The first Vision Fund demonstrated sizable heft in global tech venture capital markets, but endured a chequered performance with criticism that it invested at arguably inflated values and made disastrous bets on WeWork, Didi Chuxing and Greensill Capital. It was recently hit by a crash in tech stocks. In the latest financial year, to end-March, the Vision Fund posted a record loss of JPY3.5 trillion (US$25.7 billion) due to plunging stock prices. Meanwhile, SoftBank has witnessed the departure of a swathe of senior leadership.
The turbulent time for the Vision Fund has not deterred ADQ, Mubadala and the Royal Group from backing Misra’s new fund, which will pursue investment strategies beyond start-ups. The massive investment represents a huge personal vote of confidence in Misra and indicates Abu Dhabi has more faith in him than Masayoshi Son’s conglomerate, with Mubadala snubbing Vision Fund 2 in its capital raising.
The decision illustrates the idiosyncratic decision-making culture of Middle Eastern sovereign investors, which are under the sway of powerful rulers who place great emphasis on their own personal networks. The ability to forge top-level alliances is a characteristic of big ticket deal-making in the region, which is distinct from the more corporate institutional investor model seen elsewhere in the sovereign investor universe.
The deal also highlights the new dynamic within Abu Dhabi and the wider federation of emirates with the Sheikh Tahnoon widely regarded as MBZ’s number one within his close circle. The bond between the two brothers presents potential for an ongoing alliance between Mubadala and ADQ, which possess portfolios worth US$284 billion and US$108 billion respectively, and a blurring of boundaries in terms of their strategic distinctiveness.
ADQ is making a steady transformation from a holding company dominated by domestic infrastructure assets to private equity and venture capital. Global SWF’s database shows that ADQ has invested more than US$1.4 billion in private equity investments so far this year, while Mubadala has deployed more than US$4 billion in the asset class. When we take account of their relative size, both funds are investing in private equity at around the same rate. If anything, ADQ buddying up with the older Mubadala – itself the product of the merger of three smaller, distinctive sovereign wealth funds – in private equity strategies would help turbo-charge its investment nous.
