The Government of Abu Dhabi’s investment management subsidiary Mubadala Capital has formed a partnership with BlackRock, the world’s largest asset management firm, the two announced Wednesday.
Through its $3 billion secondaries and liquidity solutions business, BlackRock has agreed to acquire a portfolio of assets from Mubadala’s first private equity fund and has made a commitment to the sovereign wealth manager’s third private equity fund.
BlackRock and two other limited partners accounted for $700 million of the $1.2 billion deal, according to Veena Isaac, managing director for the secondaries unit. Mubadala then “collaboratively allocated” the remainder to a diverse group of investors, she said.
According to Isaac, who spoke with Institutional Investor by phone, the deal was a chance for BlackRock to “collaborate with a like-minded entrepreneurial team and structure a deal beneficial for everyone involved.”
Isaac added that BlackRock’s SLS fund tends to shoot for deals in the $100 million to $300 million range, making the $700 million commitment somewhat out of the ordinary.
“We’re comfortable doing [the deal] given that we thought it was attractive from a risk-adjusted perspective,” she said. “The opportunity to really build a longer-term partnership with the Mubadala team was a core part of our thesis, both on the private equity side and in terms of additional transactions.”
BlackRock’s and Mubadala’s senior teams have a relationship that spans years, according to Adib Mattar, head of private equity for Mubadala’s private equity fund. This “great, warm relationship” made it easy, he added, to collaborate with Isaac and her team members. “The chemistry felt so right for us in terms of a partnership approach,” he said by phone. “We really hit it off.”
Mubadala began raising its third private equity fund in late 2019, targeting $1.5 billion in total. The Covid-19 pandemic slowed the process down, but Mubadala kicked the fundraise into high gear in the fourth quarter of 2020, Mattar said. Once BlackRock and its fellow investors got involved, Mubadala hit its target and was able to raise an excess $100 million, bringing the third private equity fund’s total investment to $1.6 billion.
Mattar said that the fund will be announcing its ninth investment in roughly two weeks, which will take it to about $1.5 billion in total already invested. When BlackRock decided to commit capital, he added, there were already six investments in the fund’s portfolio.
Mubadala has some latitude when it comes to deal flow — because the sovereign wealth fund has a balance sheet, the acquisitions can be oversized. Mubadala can put half of its investment in the private equity fund, and half on the sovereign wealth fund’s balance sheet. “We don’t have interfund risk of not having capital to do deals,” Mattar said. He added that the sovereign wealth fund also acts as a seed investor for its new funds.
Although Mubadala’s deal structure with BlackRock is unique, this isn’t the first time the sovereign wealth fund subsidiary has completed one like it. In 2017, Ardian committed $2.5 billion to Mubadala, its first outside investment.
“There have been a handful of similar transactions across other organizations, but Mubadala is the only sovereign wealth fund manager that has done that,” Isaac said.
Mattar added, “This is our private equity 2.0 version of BlackRock doing a similar type of transaction.”
According to Mattar, Mubadala called the deal “La Pinta,” after Christopher Columbus’s first ship to reach North America. “It was the fastest of the three ships to discover the new world,” he said. “For us, we think having this Fund III [and] a large primary commitment from BlackRock, we’ve crossed the Rubicon, we’re entering this new world of global investing.”