Abu Dhabi’s Mubadala, one of the world’s most influential state investment funds, has revealed that it has set up a centralised system for tracking the business it does with banks. The comments will provide banks with useful clues on how to deal with sovereign wealth funds.
In an exclusive interview with Euromoney, senior Mubadala executives at the $27 billion state fund’s headoffice in Abu Dhabi say the system includes monitoring financing given to Mubadala, fees paid by the fund, as well as the amount of time and the seniority of people that banks have deployed to their work with Mubadala.
According to Derek Rozycki, executive director of structured finance and capital markets at Mubadala, relationships with banks are just one aspect of the firm’s overall method of seeking mutually beneficial relationships between Abu Dhabi and foreign businesses.
“There has to be give and take. If we have an issue that needs to be addressed, we want the bank’s best team. If we need financing, we want them to be ready to put it on the table. Both sides have to be happy,” says Rozycki.
Mubadala is unlikely to gain the kind of strategic returns it seeks by owning a large proportion in a big Western bank’s equity. But part of the rationale behind Mubadala’s almost $2 billion of investments in the equity of US private equity group Carlyle is the insight this partnership gives Mubadala into running a large private equity-style operation.
Mubadala has a $2.5 billion revolving corporate debt facility with 12 international banks. It has accessed the corporate bond market (most recently in April) and does non-recourse loan financing at the project level. It has also financed through debt some of its strategic investments in international public equity, which includes roughly $1 billion in exposure to equity in General Electric in the US.
“Building mutually beneficial relationships is an integral part of what Mubadala does, and this plays into how we manage business with banks,” says Rozycki. “By managing the relationships with the banks effectively, it gives them confidence in your credibility as an institution that they will be rewarded for their efforts. It means they’re willing to go the extra mile for you. We don’t have a problem mobilizing capital. Banks value us as a client.”
Related coverage:
Mubadala mulls media and pharma investments
31 August 2011
Major Middle East state investment fund increases emerging markets exposure
2 September 2011
For more, check out the September edition of Euromoney to hear from Mubadala’s senior management about the firm’s evolution.
