One company which was paritcularly impressive on this trip was Mubadala (arabic for "Exchange"). They are owned by (and intimately related to) the government of Abu Dhabi (the directors on the board are also the same ministers in government), yet operate seperately in many important respects which makes them a good proxy for what is happening the Emirate in general. While related to the Abu Dhabi Investment Authority (ADIA) and the Abu Dhabi Investment Council (ADIC) as a government owned entity, Mubadala has a different mandate to undertake long term, capital intensive projects with the intent of making competitive market level returns while diversifying Abu Dhabi's economy.
It was best explained on our trip as a "PE firm with a soul" where they have what they call a double bottom line: Financial returns and social / strategic improvement (will the project increase jobs, generate intellectual property etc). They try to balance their projects on "the curve" - a production possibility curve where the axes are financial return of the project and social and systematic improvements in the economy (shown above).Another interesting characteristic is that Mubadalah recently (this year) released it's financial statements publically which is surprising considering it's size, the fact that it is essentially a sovereign entity. Our speakers made a point to emphasize Mubadala's focus on three guiding principles: Transparency, Accountability and Corporate Governance.
Some of their projects include Masdar city, an ambitious project attempting to build the first carbon neutral city in the world. They also have partnerships with the Ferarri Group which has a strong investment team and partners up in ownership of companies such as Piaggio Aero. We were told Mubadala has a particular investing style in bringing in partners. In order to ensure that they behave in a manner that is "best in class" (not being complacent with it's wealth - they have the funds to wholy own companies, but bring in partners anyways), they bring in parters for a variety of reasons:
- To "test" projects as if they were capital constrained and to get an affirmation that their project is financially sound by bringing in external institutions
- Gain additional expertise of partners who participate in principal co-investing on projects
- Lay off risk - balance risk and reward
- Find the sweet spot between 'optimal' versus 'maximum' leverage
Because of the nature of Abu Dhabi (in a similar nature as Dubai) a large proportion of the workers are Expats (we have constantly heard about the 80/20 split, 80% expats and 20% locals). This creates an interesting challenge. How can you create industries, business models, infrastructure and (eventually) jobs to benefit the local Emirates while attracting the international talent to help develop the human capital to support it? As a result, some of their projects have a high degree of automation since there is relatively low population numbers and the locals are actually in "minority".
These two sisters, Dubai and Abu Dhabi, have been exceptional at putting up the infrastructure and buildings required as shown by the Burg Dubai / Khalifa (above). However, developing human capital takes longer with training, experience and opportunity. As a result, Mubadala has emphasized what they called the "C's": CA, CFA etc as education beyond the MBA which are required to succeed. They believe in this philosophy so much that they have a special CFA training program for their local Emirates which acts as an accelerated training program as a fast track to management positions. The locals write the CFA level I exam and those that pass advance in the program.
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