Abu Dhabi's Mubadala Investment Co. (MIC) reported a 4.7% jump in AuM to US$243 billion in 2020. The sovereign wealth fund's annual review also showed total comprehensive income grew 36% to US$19.6 billion, largely on the back of public equity gains, while its five-year portfolio return came out at 9.8%.

Strategic asset allocation indicates that the proportion of liquid assets – with data suggesting 29% held in stocks and bonds - remains relatively low compared to many of its peers, which meant it did not fully benefit from the surge in public equities in the second half of the year.

The extraordinary year provided opportunities for deals in sectors that are set to dominate the post-pandemic recovery. 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.  With this objective in mind, it is becoming a very active investor with a level of sophistication and sustainability that puts it on a par with Singapore’s Temasek. In 2020, it divested US$28.3 billion of assets and invested US$29.4 billion.

Managing Director and Group Chief Executive Officer Khaldoon Al Mubarak said: “In line with our long-term strategy, we increased our investments in sectors where we have high conviction, and with high performing fund managers. Technology and life sciences in particular have been essential to the world over the last year, and we see those sectors bringing greater opportunity for deeper investment. We have worked to be well-positioned in these areas and in key geographies as the global economy continues to recover.”

The fund’s private equity arm, Mubadala Capital, is surging ahead with total assets of US$25 billion under its belt. Indeed, the organization – which has 170 people employed in six offices across the world – is a force to be reckoned with in venture capital with an increasing appetite for early stage funding rounds among its Ventures team, which focuses on Series B+ investments in European-based tech companies.

Mubadala Capital’s targets in 2020 were those sectors that are expected to see the strongest bounce-back in activity as the economy recovers, namely tech, life sciences and retail & consumer. The Covid-19 pandemic has boosted its interest in expanding its global tech and healthcare portfolio, with a focus on early-stage innovators – and it has overhauled and restructured its organization to elevate disruptive investment in its business model.

In order to generate the liquidity to deploy capital into disruptive industries in technology and healthcare, MIC is set to sell down in “legacy commodity sectors”. Last month, it began preparations for an IPO in its semiconductor business GlobalFoundries. The IPO is reportedly targeting a total enterprise value of US$20 billion and is scheduled for 2022. The offering is set to coincide with the global recovery from the pandemic, which is expected to see demand for electronic components soar as the tech sector moves up a gear.

Global SWF’s data shows Mubadala made 23 direct private equity transactions worth US$10.6 billion in 2020, of which US$6.3 billion was committed to strategies overseen by Apollo, Silver Lake and Barings - this is in addition to its allocations to other private market segments, such as real estate and infrastructure. Of the remaining 20, 14 were venture capital and mostly in Series A to C funding rounds. The trend so far in 2021 has seen further focus on early stage VC at a rate of one investment per week, implying a potential doubling of private equity transactions this year. Mubadala not just diversifying in terms of sectors, but also geographically as it sees India and China offering the best growth potential in tech and healthcare.

Mubadala Capital is also steering the fund’s Strategic Investment Partnerships (SIPs) are set to include a new deal with the UK, in particular health, technology, clean energy and infrastructure. Mubadala uses SIPs as its preferred framework to drive co-investment programs. SIPs enable it to gain intelligence on market opportunities and co-invest with the local fund or government, thereby lowering costs. Britain’s life sciences and renewables sectors have received the fund’s backing with plans to invest up to GBP5 billion in direct investments in private markets through to 2026.

One of the most exciting areas for the fund is its green investment arm, Masdar, which is pushing into frontier markets in the Commonwealth of Independent States – Kazakhstan, Uzbekistan and Ukraine – to develop their massive clean energy potential in solar and wind.  In the home market, MIC is spearheading the development of a green hydrogen economy. The Abu Dhabi Hydrogen Alliance brings together Mubadala, the increasingly active Abu Dhabi Developmental Holding Company (ADQ) and national oil company ADNOC to “establish Abu Dhabi as a trusted leader of low-carbon green and blue hydrogen in emerging international markets.” The alliance is seeking to extend the use of hydrogen as an energy source in utilities, transportation and industry.

The question is whether Abu Dhabi will continue its SWF consolidation. MIC which was created in 2017 as a merged of two Abu Dhabi sovereign wealth funds, the International Petroleum Investment Co. (IPIC) and the Mubadala Development Co. (MDC), and in 2018 started with the integration of the Abu Dhabi Investment Council (ADIC). All three funds had very distinct differences and objectives. It would not be too much of a stretch of the imagination that MIC would take on assets from ADIA, which is struggling with low returns, or perhaps merge with the increasingly acquisitive ADQ, a domestic holding company that is now pushing into emerging market venture capital. Altogether, Abu Dhabi’s sovereign wealth funds have assets exceeding US$1 trillion.

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