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What Mubadala did next

A huge stapled secondaries deal last April set sovereign wealth fund Mubadala on the road to being a third-party fund manager, but what has it done with the capital?

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Getting a hold of Mubadala Investment Company is tough. When we asked around, one source said, “if you do make contact, let me know how”. Considering it has around $126 billion in assets under management, Abu Dhabi’s second-largest sovereign wealth fund has kept a low profile. But recent moves by its in-house investment arm Mubadala Capital are starting to attract attention.

Since it was formed in January 2017, from the merger of Mubadala Development Company merged with International Petroleum Investment Company to create the world’s fourteenth largest SWF, Mubadala Capital has been positioning itself to manage third-party private capital. These efforts came to a head last April with the announcement of the largest ever stapled secondaries deal, backed by Ardian.

The Paris-headquartered investment manager used its 2015-vintage ASF VII secondaries fund to invest $1.75 billion in Mubadala’s existing portfolio of 14 limited partnership stakes and 14 direct stakes, and commit $750 million to a fresh fund – target $1.5 billion – that Mubadala will manage.

“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 of Mubadala Development Company, said at the time.

Since then, silence. What happened to that blind-pool fund? Who made up the $750 million remainder? And is Mubadala any closer to raising a new fund without a stapled element?

According to a source close to the matter, the other $750 million was accounted for a handpicked group of investors. PEI understands it contains US public pension funds, sovereign wealth funds, insurance companies, family offices and endowments from the US, Europe and Asia-Pacific. The plan was to bring in “long-term participants in PE that were savvy enough to be able to understand the transaction.”

The fund has made a mix of direct investments, co-investments and some primary fund commitments, predominately in the US and Europe, the source says. The SWF believes its size and long-term investment horizon give it access to high-quality proprietary dealflow and it is confident that the fund will outperform.

“Now they have a relationship with these investors. When the portfolio performs as they expect it to [well] and the natural time comes to raise a third-party fund, they’ll have a group who know about them and the deals they’ve done. They’ll say, ‘let’s commit with them’,” argues the source.

Mubadala has no firm plans to raise a fund unaided and no sense of how much it would target – at least not yet. The investment period of its current fund is “well under way,” PEI understands. Either way, the firm seems to be making decent progress towards its endgame: becoming a bona fide private equity manager.