By Rory Jones and Miriam Gottfried
At the end of March the man who controls a $230 billion Abu Dhabi sovereign-wealth fund dialed up some of the world’s biggest investors as a new pandemic rattled the global economy. Khaldoon al-Mubarak wanted to know how bad things could get.
Japanese billionaire Masayoshi Son assured the chief executive of Mubadala Investment Co. that a fund housing $15 billion of Mubadala’s money was diverse enough to withstand the storm. BlackRock Inc. CEO Larry Fink explained to Mr. Mubarak how government stimulus could boost the U.S. economy. Egon Durban, co-CEO of private-equity firm Silver Lake, argued the market had become too bearish and was overlooking an eventual vaccine.
“In those early days I was on the phone all the time,” said the 44-year-old Mr. Mubarak, a Tufts University graduate who sports a crew cut and is as comfortable in a suit as a traditional Emirati thobe. “For me, it was instrumental in really forming a view.”
The view that emerged was that the world would eventually bounce back from the pandemic and that an unprecedented crisis would bring big opportunities. Mr. Mubarak staked billions on that belief, committing to new investment partnerships with U.S. private-equity giants Apollo Global Management Inc. and Silver Lake while making new bets on everything from Alphabet Inc.’s self-driving car effort to a firm working on a coronavirus vaccine trial.
He made this push while many of his peers pulled back. Mubadala invested more than $11 billion this year as of December 1, according to consulting firm Global SWF, up 46% from the entirety of last year. That compares with a 36% decline in new capital deployed by all sovereign funds over the same period. A larger United Arab Emirates fund, the $500 billion Abu Dhabi Investment Authority, is among those that invested less, according to Global SWF. ADIA declined to comment.
The moves reinforce Mr. Mubarak’s standing as a key player in a larger effort by Abu Dhabi Crown Prince Mohammed bin Zayed Al Nahyan, the U.A.E.’s de facto ruler, to reduce the federation’s historic reliance on oil revenue and seek out newer and faster-growing investment prospects. The emirate discovered oil in 1958 and has since become one of the world’s biggest producers. Mr. Mubarak also chairs Manchester City Football Club, one of Abu Dhabi’s prized possessions, and oversees the U.A.E. nuclear energy program as well as the country’s relationship with China.
Growing up quickly
His rise mirrors that of Abu Dhabi as an emerging economic and political power. Mr. Mubarak’s family has long been close to Abu Dhabi’s royals; his grandfather was the emirate’s first chief justice following the formation of the U.A.E. in 1971 and his father was an Emirati diplomat who was assassinated in 1984 by a gunman in Paris. Mr. Mubarak’s sister is the head of Abu Dhabi’s environmental agency and his brother leads the emirate’s tourism authority.
The deaths of his father when he was 8 years old and his mother when he was 19 forced Mr. Mubarak to grow up quickly. He lived in a typical Emirati environment, with his grandparents in a house next door and cousins nearby. He attended the American Community School of Abu Dhabi and studied economics at Tufts in Massachusetts. Speaking English as adroitly as Arabic, he became adept at bridging cultural gaps that have bedeviled other sovereign-wealth funds. That is one of the reasons that he was chosen to be the face of the royal family’s purchase of Manchester City, according to people close to Mubadala.
He started his career at Abu Dhabi’s national oil company before joining a government group tasked with drawing investment and expertise into the U.A.E. In that role, he helped seal a deal to build a 226-mile undersea gas pipeline from Qatar to the U.A.E. and then overland to Oman. Mr. Mubarak was 26 years old in 2002 when he took the helm at Mubadala, launched to use oil wealth to create new industries at home and diversify the country away from hydrocarbons. Prince Mohammed wanted to empower talented Emiratis and Mr. Mubarak had demonstrated leadership by managing the complex gas project, according to people familiar with Mubadala’s founding.Sovereign PowerAbu Dhabi’s Mubadala has emerged as one of the most active sovereign wealth funds globally this year during the pandemic.Annual number of investments by Mubadala.deals2015’16’17’18’19’20051015202530Annual value of investments by Mubadala.billion2015’16’17’18’19’200246810$12Note: 2020 figures are through Dec. 1.Source: Global SWF
With Mr. Mubarak as chief, Mubadala set up a lending partnership with GE Capital, launched aircraft-parts manufacturing with help from Boeing Co. and Airbus SE and invested in a 364-bed Cleveland Clinic hospital in Abu Dhabi. He helped negotiate the contract to bring the Formula One racing circuit to Abu Dhabi and put his own stamp on Mubadala by making it a research-based organization that could go toe-to-toe with any Western investment firm, these people say.
In the years before the coronavirus crisis, Mr. Mubarak put himself in a stronger position by amassing a lot of extra assets. In 2017 Mubadala absorbed another Abu Dhabi sovereign-wealth fund, International Petroleum Investment Co., which became entangled in a scandal that eventually sent its former head to prison. In 2018 Mubadala doubled its size to roughly $230 billion by merging with another government investment firm. Mr. Mubarak also freed up extra cash. Mubadala netted roughly $3 billion in 2019 from the sale of a stake in Spanish oil-and-gas company Cepsa, and this year it issued $4 billion in bonds while selling a stake in Austrian petrochemicals firm Borealis AG for $4.68 billion.
When the U.A.E. closed the country’s borders in March, Mr. Mubarak took several actions. He called dozens of top investors and health-care experts for their views—phoning Asia contacts in the mornings, Europe in the afternoons and the U.S. in the evenings. He asked his investment committee to assess the worst-case scenario for Mubadala’s investments while Mubadala executives checked with executives of companies in which it held stakes to understand funding needs. In April he phoned Manchester City manager Pep Guardiola following the death of Mr. Guardiola’s mother, who died after contracting Covid-19.
“It was hard,” Mr. Mubarak said. “There’s nothing worse than losing a parent.”
‘Big, bold bets’
A series of new private-equity partnerships demonstrated his willingness to embrace additional risk during this uncertain time. Mubadala invested alongside Silver Lake, the private-equity firm based in New York and Menlo Park, Calif., in the $2.25 billion funding round for Alphabet’s self-driving car unit in February. In May it pledged $1.2 billion for a stake in Indian tech and telecom giant Jio Platforms Ltd.—a company backed by Facebook Inc., Silver Lake and Saudi Arabia’s Public Investment Fund, among others. Then in September Silver Lake announced a $2 billion commitment from Mubadala to help it launch a new strategy that allows the private-equity firm to invest the money over a 25-year period, far longer than is typical for a buyout fund. Mubadala also took a stake in the tech-focused Silver Lake, which has itself emerged as one of the most active investors during the pandemic.
“People who are willing to be entrepreneurial in the finance industry are really, really rare,” said Silver Lake’s Mr. Durban of Mr. Mubarak and his deputies. “These are people who make big, bold bets.”New TerritoryMubadala is piling into technology, financial services and retail in an attempt to help Abu Dhabi reduce itsreliance on oil revenue.Cumulative value of 2020 investments by Mubadala, by industrySource: Global SWFNote: Figures are through Dec. 1..billionFinancial servicesTechnology, media andtelecommunicationsRetail and consumerOther2020Dec.0246810$12
Acting as a lender during this period of uncertainty was part of Mubadala’s strategy, too. Reasoning that the market turmoil caused by the coronavirus could tighten borrowing standards, Mubadala became the central investor in a new $12 billion business Apollo launched to make big loans. While those discussions had been ongoing since last year, the pandemic added urgency, according to a person familiar with the fund’s thinking. Mubadala later announced a $3.5 billion partnership with Barings LLC to make smaller loans to midsize European companies.
“Mubadala said: ‘As everyone else is paralyzed, this is our time to strike big partnerships,’” said James Zelter, Apollo’s co-president.
Mr. Mubarak knows from experience that new investment partnerships can have ups and downs. In 2017, the fund committed $15 billion to the $100 billion SoftBank Vision Fund, which Mr. Son and his colleagues proceeded to pour into technology startups. Mubadala followed Saudi Arabia’s Public Investment Fund, which contributed $45 billion. Executives at the sovereign-wealth funds have privately expressed frustration with the Japanese entrepreneur’s investment style and his fund’s big bets on companies like WeWork that lack a clear path to profitability, The Wall Street Journal has reported. Publicly, all have consistently said their relationships are good. Mubadala and PIF so far have declined to contribute to a second Vision Fund.
In the fiscal year ending in March, the first Vision Fund contributed to big losses at SoftBank. So far, however, it has weathered the coronavirus crisis, just as Mr. Son told Mr. Mubarak it would. It posted significant gains in the quarter ended Sept. 30 this year.
“From the time we met, Khaldoon and I have shared a vision that technology will transform every sector,” Mr. Son said in an emailed statement commenting on his relationship with Mr. Mubarak. Mr. Mubarak said that in challenging times he learned not to point fingers. “If you look at how the Vision Fund has performed, it’s been strong,” he added.
Fearing Missed Opportunities
The direct investments and big partnerships with other firms mean Mr. Mubarak is now more accountable than ever for future successes—and failures. In some cases his fund scrambled to offer support to firms it had previously backed. At the height of lockdowns in Europe, the fund and other investors extended a convertible loan to e-scooter company Tier Mobility that meant the Berlin-based startup could operate through the crisis even as people remained stuck at home. The debt was later converted into equity as part of a $250 million funding round that included SoftBank’s second Vision Fund.
“In the pandemic, they were very supportive while other investors were a bit scared and didn’t know what to do,” Tier Chief Executive Lawrence Leuschner said of Mubadala.
What helped was that Mubadala already had offices in San Francisco, New York and London. That allowed the fund to spot lesser-known tech firms or companies in the U.S. that could profit from the coronavirus chaos, according to people with whom the fund has co-invested.
Mubadala this year led or was part of investments in U.K. medical software and communications firm Envision Pharma Group, Pennsylvania-based pharmaceutical supply chain solutions company PCI Pharma Services, and drug discovery and development firm Evotec SE, based in Germany. Last month the fund also took a stake in the U.A.E. firm working with China’s Sinopharm on a phase-3 vaccine trial.
As it became clear the pandemic was deterring people from public transit, the fund invested more in companies it thought would benefit from the shift in transportation trends. It doubled down on Tier, joined another funding round in U.K. used-car marketplace Cazoo Ltd. and poured $100 million of fresh capital into Chinese electric-car maker Xpeng Motors.
Convinced the delivery industry would benefit from the pandemic, Mubadala also joined with Oaktree Capital Management LP to lead a $1 billion investment in Reef Technology Inc. It turns cities’ unused real estate into fulfillment centers for delivery firms, walk-in clinics for health care operators and kitchens for restaurants seeking closer access to customers. Reef says it can reach 70% of North America’s urban population via its hubs, many located in parking lots.
“Pre-pandemic, would we have invested this quickly? No,” said Ibrahim Ajami, Mubadala’s head of venture capital. “The pandemic has enabled unbelievable growth.”
Mr. Mubarak said his fear this year was that he would miss out on opportunities arising from the crisis. He wants to avoid the regret he said he felt about a prior investment in Santa Clara-based Advanced Micro Devices Inc., which his fund first bought in 2007. It sold most of its stake in 2019 when the chip maker’s shares were roughly $35 a share, making a solid return, but then watched as AMD stock subsequently soared, Mr. Mubarak said. AMD shares are now trading at roughly $94.
“It is important not to miss an opportunity,” he said.
SOURCE : WALL STREET JOURNAL