Mubadala Investment Company, Abu Dhabi’s strategic investment arm, expects short-term challenges stemming from rising interest rates and inflation, however, these headwinds will not change the company’s investment strategy or its view on sectors it invests in, its chief executive said.
“When I look at 2022, for us as Mubadala ... there’s no shift in terms of our strategy, in terms of themes in which we are investing in [and] in terms of how we look at the next five to 10-year cycle,” Khaldoon Al Mubarak said at the Global Manufacturing and Industrialisation Summit (GMIS 2021), which started in Dubai on Monday.
Inflation is on the rise in many parts of the world and tightening of monetary policy will have “implications”, however, their impact will vary from market-to-market, he told delegates.
“From a short-term perspective, yes, there are challenges ahead,” he said. “I expect there would be some adjustments here and there, but not to the point where I would change my perspective, or our perspective as Mubadala, from an investment and thematic view.”
The global economy, which tipped into its worst recession last year since the 1930s, is rebounding this year. More than $25 trillion in monetary and fiscal support pumped in by central banks and governments around the world has helped the strong economic bounce back that has also stoked inflation.
US inflation advanced to 6.2 per cent in October, the highest level in more than three decades. It is significantly higher compared with the 0 per cent that the Federal Reserve is using as the benchmark interest rate. Central banks are now under growing pressure to change their monetary stance and raise interest rates to curb inflation.
However, Mubadala is a long-term investor that takes a “patient” approach to investing and it will continue to focus on technology investments, opportunities in life sciences and expand its portfolio of renewable and energy transition assets, Mr Al Mubarak said.
The company’s investment in GlobalFoundries reflects Mubadala’s long-term strategy, which involves taking clear “thematic views” with “conviction” and the ability to “weather cycles”, he said.
The sovereign fund, which invests on behalf of Abu Dhabi government and has $243 billion in assets, invested in the chip maker in 2009. In October, GlobalFoundries, the world's third-largest semiconductor manufacturer, raised $2.6bn in its US initial public offering.
“We had our convictions, we stuck with them [and] went through very difficult cyclical period that would have challenged may be other investors,” Mr Al Mubarak said.
“Credit to our invest team … here we are in 2021 [and] that industry is what we always suspected it will be, critical to supply chain of the world, an industry that will impact pretty much every major industry going forward."
Mubadala is “very positive” about its investments in GlobalFoundries and “we have great confidence in where it is headed”, he said.
The company has also taken the long-term view in other sectors including energy transition and has been investing in renewable energy since 2006, according to Mr Al Mubarak.
“We took a view on renewables, not when it is a popular subject, as it is today, but 16 years ago,” he said.
Masdar, the clean energy subsidiary of Mubadala, over the past decade and a half, has become a global investor in renewables, with $20bn in investments in 33 countries. It is involved in almost 11 gigawatts of renewable power generation and is “well-positioned” to grow with scale, he said.
Mubadala, which is an anchor investor in SoftBank’s Vision Fund along with Saudi Arabia’s Public Investment Fund, is bullish on new technology investments including artificial intelligence, data analytics and data infrastructure.
“We are very well-positioned and we have been investing in that space for a couple of years now,” Mr Al Mubarak said.
“[However], we were not as early as I would have liked [to be an investor in the sector]. I would have loved to have started and taken that thematic view five or six years ago … [what] we probably took three years ago.”
Life sciences is another key area of investment for the company. Earlier this year, Mubadala pledged to invest £800 million ($1.01bn) in Britain’s life sciences industry over the next five years, as part of a £1bn Sovereign Investment Partnership between the UAE and the UK. The remaining £200m will come from the UK’s Life Sciences Investment Programme.
Mubadala is at the heart of the government’s plans to diversify Abu Dhabi's revenue base and generate income from sources other than oil. The company’s portfolio of investments spans five continents with interests in aerospace, information and communications technology, semiconductors, metals and mining, renewable energy, oil and gas, and petrochemicals.
At home, it holds stakes in Emirates Global Aluminium, aerospace manufacturing company Strata, satellite communications company Yahsat and Mubadala Petroleum.