Mubadala Capital, the asset management subsidiary of Abu Dhabi’s Mubadala Investment Company, on Thursday announced a $2.1 billion private equity partnership transaction with France's private investment house Ardian.
Under the agreement, Ardian will invest in a portfolio of high-quality private equity assets managed by Mubadala Capital. It will also make a primary commitment to Mubadala Capital’s private equity funds.
This transaction is a significant vote of confidence in our ability to create value for our investors and partners by executing against our strategy
Hani Barhoush,
managing director and chief executive of Mubadala Capital
As part of the latest transaction, Ardian and Mubadala Capital have curated a portfolio of 10 limited partnership interests with a leading group of general partners predominantly in North America and Europe, as well as six high-quality direct investments, the entities said in a statement.
All of the assets in the new portfolio were previously held on Mubadala Capital’s balance sheet, following a successful spin-off from Mubadala Investment Company in 2021.
“This transaction is a significant vote of confidence in our ability to create value for our investors and partners by executing against our strategy and differentiated approach to the private equity market,” said Hani Barhoush, managing director and chief executive of Mubadala Capital.
Evercore acted as the exclusive financial adviser to Mubadala Capital on the transaction.
Mubadala Capital’s private equity strategy focuses on direct investments in North America and Europe in core sectors, including media, sports and entertainment, consumer and food services, financial services and business services.
Mubadala Capital is the wholly owned asset management subsidiary of Mubadala Investment Company — a $284 billion global sovereign investor based in the UAE capital.
It manages nearly $17 billion in aggregate across its own balance sheet investments and in third-party capital vehicles on behalf of institutional investors, including four private equity funds, three early-stage venture funds and two funds in Brazil focused on special situations.
“This transaction is the culmination of a highly collaborative and close working relationship with Mubadala Capital over the past five years,” said Mark Benedetti, member of the Ardian executive committee and co-head of Ardian US.
“They are a well-respected team with an established track record, and this latest transaction is indicative of the importance we place on being a valuable long-term partner.”
Ardian, which has more than 990 employees spread across 15 offices in Europe, the Americas and Asia, manages or advises $140 billion in assets on behalf of more than 1,400 clients globally.
In April 2017, Mubadala entered into a $2.5 billion investment deal with Ardian, which also included the creation of a private equity fund.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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