Gulf sovereign wealth funds are preparing to pour billions more capital into private markets with new hires and restructuring.

In common with other sovereign wealth funds, Mubadala is revamping its structure and seeking to become more nimble in grasping opportunities as it sets out to achieve AUM of nearly US$500 billion by 2030.  Mubadala is restructuring its personnel as it continues to absorb teams from Abu Dhabi Investment Council (ADIC), which began merger with the fund in 2018.

ADIC’s Global Special Situations team, which is known for targeting the highest returns, has seen three Principals leave to join Waha Capital in the past year: Ahmed Al Mehairi (as CEO), Hashem Dabbas (as CIO, Private) and Hitesh Gupta (as MD, Private). Managing US$2.6 billion of assets, Waha is a listed company, but 14% owned by Mubadala and chaired by Mubadala personnel. The transfer of personnel into the listed asset management company suggests Mubadala is seeking to bolster its performance to derive a higher return and aligning with the sovereign wealth fund’s own strategy.

Meanwhile, Mubadala is extending its bilateral deals with the UK the most recent focus of interest, At the same time it has forged a deal with Bpifrance to back a new African private equity platform, committing EUR350 million (US$414 million) each to invest in high growth startups. To finance its private equity investments, the fund is selling chunks of its legacy assets, such as its semiconductor business GlobalFoundries whose value has been boosted by a global semiconductor drought.

Global SWF data show that Mubadala is increasingly targeting earlier stage investment rounds with an emphasis on disruptive tech. Since the consolidation of the three funds in 2018, Mubadala has moved from acquisitions heavily oriented to chunky stakes in the energy sector towards venture capital in tech and retail.

The Abu Dhabi fund is a prolific investor in venture capital this year with 33 reported deals so far, up 136% in volume compared to the whole of 2020. The trend so far in 2021 has seen further focus on early stage VC at a rate of at least one investment per week, implying a potential doubling of private equity transactions this year. Private equity investment by Mubadala so far this year totals US$3.44 billion in 32 transactions, equating to an average transaction value of around US$108 million, which is down from US$463 million in 2020.

In terms of value, Global SWF estimates direct venture capital investment of US$1.14 billion in the year-to-date. The Abu Dhabi fund’s aggregate private equity investments in terms of value are dominated by direct investments in the oil and gas sector via its Mubadala Petroleum subsidiary, with healthcare and pharma also increasing in importance, compared to 2020 when financial services and tech were favored sectors.

Nevertheless, in terms of volume of transactions, tech remains a high priority and comprises most of the fund’s venture capital allocation. As such, Mubadala’s hires are likely to continue to focus on building teams around venture capital in innovative sectors. Its venture capital investments are directed by Mubadala Ventures, which possesses a team of around 30 personnel, although ADIC also has its own separate but smaller private equity and venture capital teams.

Saudi Arabia’s Public Investment Fund has hired Tony Hage as the head of global private equity. He replaced Kevin O’Donnell, who built PIF’s 20-person team to globally invest more than US$80 billion across funds, co-investments, and direct and strategic programs.

Under O’Donnell, the portfolio achieved a net internal rate of return of 31%, achieving alpha of more than 10% above the public market equivalent. PIF’s global private equity holdings are part of its “international diversified pool”, which also includes real estate and infrastructure and has a staff of more than 50.

Before he joined PIF, Hage worked for three years as a senior adviser to Mercer Investments in the US and served as managing director of Axis Strategic Partners, Bliss Capital, and Konstellation.

PIF has been undertaking an organizational revamp and in June created two new deputy governor positions as it plans for accelerated growth. Turqi Alnowaiser, who heads PIF’s International Investments Division, and Yazeed Alhumied, who leads the Middle East and North Africa Investments Division, were given the roles. PIF is also boosting its personnel to more than 1,100 – around twice the level of its larger Kuwaiti stablemate KIA, which has estimated AUM of US$588 billion, and a bigger headcount than the US$1 trillion+ funds Norway’s NBIM and China’s CIC. The direction of travel indicates that PIF is seeking not only to grow through developing chunky domestic real assets, but also as an active global investor.

With its sights on AUM of US$1 trillion by 2025 and US$2 trillion by 2030, the fund has grown to US$430 billion - a leap of US$30 billion since end-2020. Its target would move it from the world’s 12th biggest state-owned investor to the second biggest, after Norway’s NBIM.

The new PIF Program 2021-2025 goals indicate US$ 40 billion to be invested every year within the Kingdom (which seems attainable given the scale of the giga-projects), a 21% in new and growth sectors (1% up) and 1.8 million direct and indirect jobs to be created in the Kingdom. PIF has also grown its AUM to $430 billion since 2016, and has invested approximately $90 billion in the Saudi economy during that time, while creating more than 331,000 new direct and indirect jobs in Saudi Arabia.

Compared to Mubadala, PIF’s direct investment in private equity is less active as it has sought to drive its investments in renewable energy production. Yet , it is seeing marked growth compared to last year and has switched from a focus on tech and retail and consumer segments to financial services and industry. New hires in global private equity suggest a stronger push into private markets in the year ahead, following Mubadala in increasing its venture capital allocation.

Related funds Mubadala PIF