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Three questions on Mubadala’s Russian acquisition

Is the sovereign wealth fund’s acquisition of a private equity team part of a grand fund management plan?

This week Abu Dhabi’s Mubadala Investment Company announced it had acquired the “private equity advisory unit” of a London and Moscow-based investment manager Verno Capital.

What is Mubadala, and what is it trying to do?

Mubadala Capital is the in-house investment arm of the Abu Dhabi state investment firm Mubadala Investment Company. It was formed in January when the Gulf state merged its two state investments funds, Mubadala Development Company and International Petroleum Investment Company, to create the world’s 14th largest sovereign wealth fund with $125 billion in assets under management.

Notably, MIC was part of a ground-breaking stapled transaction earlier this year, in which private equity heavyweight Ardian and clients acquired $1.75 billion-worth of MIC’s existing private equity assets and committed $750 million to a new Mubadala-managed private equity fund.

This was a watershed moment for the sovereign investor. “Managing funds on behalf of third-party investors is both an endorsement of our strong investment track record and part of a longer-term strategy to further institutionalise the Mubadala Capital platform,” Waleed Al Mokarrab Al Muhairi, deputy group chief executive and CEO of the emerging sectors platform at Mubadala Development Company, said in the statement.

What has it bought in Russia and from whom?

Mubadala Investment Company has acquired an advisory team from Verno, an investment manager that was set up in 2009 and has two remaining business lines: a public equities unit and a private equity unit with more than $1 billion in assets under management between them. The PE unit is led by partner Roman Kudryashov, a former senior figure on the investment side of Russian state-owned bank Sberbank, where he developed the bank’s $4 billion non-performing loan restructuring business. The PE unit is understood to be managing two different funds, but details on these are scant. Mubadala has been “a major shareholder and investor in Verno Capital since 2010”, the group said in a statement.

The team joining Mubadala was built specifically to advise and source deals for the sovereign fund in relation to its $6 billion co-investment agreement with the Russian Direct Investment Fund and according to one source with knowledge of the firm has been working exclusively on the Mubadala mandate for around four years, investing a range of sectors, including mining, retail, logistics, petrochemicals and financial infrastructure.

Is this part of a grand plan?

Mubadala has grand plans to become a manager of third party capital and the Ardian deal represents a significant leap forward in this regard. It is not clear at this stage whether the Verno deal is part of this, but it looks unlikely: the $1.5 billion fund will primarily pursue opportunities in North America and Europe, through directs, co-investments and fund commitments, rather than in Russia. Mubadala did not respond for requests for comment.