Mubadala Capital sees probability to purchase up giant personal fairness stakes | USAEMALL.com

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An arm of Abu Dhabi’s sovereign wealth fund is preparing a push into private equity markets, spotting what it believes is an opportunity to take over large holdings as buyout groups race to sell assets and return cash to investors.

Mubadala Capital, the asset management subsidiary of the $302bn sovereign wealth fund, has raised $3.1bn for its latest private equity fund, surpassing a $2bn target.

It is positioning the fund as a solution to private equity groups seeking to exit large bets, or PE-backed companies managing heavy debt burdens that need fresh capital.

Mubadala’s private equity fund generally is seeking to invest between $150mn to $350mn in equity per investment, but will push that investment to as much as $500mn for “great ideas”. It now manages $24bn, three-quarters of which comes from external investors.

“We’re seeing a lot of limited partners are short on liquidity,” said Oscar Fahlgren, chief investment officer of Mubadala Capital, in an interview with the Financial Times. “There’s a focus on realisations by a lot of funds, and that’s driving interesting opportunities for those of us who are well capitalised.”

This year Mubadala Capital has increased its investment pace, striking large deals to buy credit manager Fortress Investment Group, high end baby stroller brand Bugaboo, and Spanish IT consultancy Babel.

Hani Barhoush, chief executive of Mubadala Capital, said a two-year lull in private equity deal making had created a window for the fund to use its financial prowess to build majority investments in large PE-backed companies.

Though Mubadala Capital’s private equity fund is small relative to funds raised by industry giants like Blackstone and KKR, it uses equity financing from its sovereign wealth parent to fund large-scale takeovers.

Earlier this year, Mubadala Capital acquired a majority stake in Fortress from Japanese conglomerate SoftBank at a valuation of about $3bn.

The complex deal is part of Mubadala’s bet that private fund managers will see their growth fuelled as private investment opportunities become increasingly available to individual investors, said Barhoush and Fahlgren.

In the takeover of Fortress, Mubadala Capital agreed to an about $2bn equity commitment that was more than its private equity fund had in assets at the time. It was able to complete the deal with additional capital from its corporate parent.

Once the deal was agreed and went through regulatory approvals, Mubadala Capital then syndicated the equity commitment to other investors.

“One of the luxuries we have, given the size of our balance sheet and the size of our parent company, is we can write much larger checks,” said Barhoush.