In the last few months, Mubadala Investment Co. went against all common investment wisdom. This United Arab Emirates (UAE) state-owned investment fund started purchasing shares of companies worldwide. This significantly increased their portfolio. Additionally, it helped them become a dam on the tide of tech companies going under.
At the moment, the list of companies that Mubadala has either purchased completely or taken a share in includes:
- Envirotainer AB – $2.8 Billion
- Fortress Investment Group – $1 Billion
- SpotOn – $100 Million
- Juni – $100 Million
- Getir – $768 Million
- Vision Fund – $100 Million
- Klarna Bank AB – $800 Million
- Wefox – $400 Million
The Emirati sovereign fund currently stands at $284 Billion. This means these purchases of almost $10 Billion will likely not dent it. However, all companies on the roster have been devaluing significantly. So we may wonder if these investments will pay out.
Mubadala is co-funded by the Abu Dhabi oil sales. The war in Ukraine made these sales skyrocket recently. Economically, the UAE remained neutral in this war, despite its anti-war message.
Now, the fund is trying to find ways to place their new gains, especially in the slumping tech market. In fact, the same factors hiking oil prices have also devalued many tech companies.
The UAE Becoming a Go-To Investor
Many industry hopefuls have seen a significant slump. Even blockchain products have seen signs of an investor exodus. However, the tech startup industry is still fueled by venture capital.
When it comes to institutional investors, though, Mubadala is going against the grain. It is investing heavily in the tech industry. This week, the fund has raised funds for Klarna Bank AB, a Swedish fintech company. Additionally, it also funded Wefox, a German online insurance supplier.
The investment nature of the Abu Dhabi fund is making many tech industry players view it as a go-to investor. As an institutional investor, Mubadala is focusing on long-term gains and development. It is also looking to further diversify its portfolio.
As such, companies feel less pressured to show instant results. They can also develop their products properly and grow from a more solid base. This is exactly what institutional investors elsewhere, including the US and Europe, expect. In turn, they might come on board later.
Focusing on Tech, Food, and Healthcare
Judging by the companies joining the portfolio, Mubadala’s main goal is technology. More specifically, the focus is geared toward financial technology (fintech). Still, one of the biggest individual investments on the list is Gretir, a Turkish on-demand delivery service app akin to Uber Eats.
This Turkish startup that started in 2015 received $768 Million from the fund alone, finally evaluating the company at $11.8 Billion. Unlike many tech companies, Gretir did not experience a fall in recent months. This may be because Turkey is also neutral in the Ukraine conflict.
The fund is also making significant investments in the healthcare sector and accompanying industries. For instance, Mubadala agreed to purchase Swedish Envirotainer AB, a company focusing on medical freight, for $2.8 billion.
Additionally, the company has joined another investment fund, the New York-based Warburg Pincus, to purchase a pharmacy analectic unit. Together, they bid over $2 billion back in February to acquire the unit formerly owned by British Pharma Plc.
Mubadala Diversifying Its Portfolio
In 2017, the Mubadala Development Company and the International Petroleum Investment Company (IPIC) merged together. Both are state-owned by the Abu Dhabi Emirate in the United Arab Emirates. Since then, Mubadala Investment Co. has grown its portfolio significantly.
Under its banner, Mubadala has companies like Ferrari and the Austrian OMV. It also includes companies focusing on self-driving technologies, like Waymo, the Alphabet (Google)-owned firm.
The biggest contributor to the fund’s revenue and operating income is the IPIC. It directly owns and sells the oil extracted in the country. However, most other investments have brought benefits to the portfolio. They have also established Mubadala as a prudent institutional investor globally.
Focused on Long-Term Investments
Many companies, especially those focused on consumer products and retail, have seen a major benefit from boutique investors. However, this attraction has introduced a significant instability in those markets.
Namely, smaller investors have shown to be less patient and more risk-averse. They are willing to sell off their stock if a company is not growing as quickly as they wanted. Any issues will greatly drive these investors’ decisions. And this is what happened with the current tech supply shortage.
Companies funded in that way are finding it difficult to meet those marks. They feel the need to drive the process faster. But often, this only leads to unfinished products and strategies.
Institutional investors such as hedge funds and sovereign funds are the opposite in that way. They prefer long-term investments that payout dividends over capital gains. For a long time, this position has pushed institutional investors away from tech. This also slightly hurt the industry.
But Mubadala is setting a positive example of long-term stable investments into tech companies and even startups. As a result, other major players may come on board as well. This would prevent future slumps in the industry. At the very least, the coming slumps will not be as intense.
What Will Mubadala’s Billions Mean for the Tech Industry?
Even with significant efforts, Mubadala’s investments in the tech industry are unlikely to turn the tide. At the moment, NASDAQ is down almost a third of its peak value, reported last November. The predicted loss has cost the industry roughly $1.5 Trillion.
Yet, the investments from Mubadala might prove to be a good example and a driving force behind other investment funds. They may even push individual investors to place their money and trust in the tech industry.
This turn in perspective may shift the tides. It may even promote the creation of new solutions. Altogether, this will push the industry forward. Because of these opportunities, tech industry CEOs have expressed their confidence in the returning market. It is left to see how quickly such a turnover would happen.
