New deals across the globe have put a relatively new Abu Dhabi sovereign fund in the limelight.
According to Bloomberg News, Lime, an electric scooter and bike start-up based in the U.S., entered into a convertible debt deal on Friday. Investment by Abu Dhabi Growth Fund was followed by an agreement with Indonesia by Lime.
According to the Website of the Abu Dhabi Growth Fund (ADG), it is one of the few funds to manage $1 trillion in sovereign wealth capital and has a unique risk profile. The fund was set up in July.
Apart from ADG, Mubadala Investment Co and Abu Dhabi Investment Authority, with an estimated $243 billion and $829 billion in assets, are based in Abu Dhabi. The UAE government also set up ADQ in 2018 to take over some of the biggest assets of emirates.
ADQ, earlier known as Abu Dhabi Developmental Holding Co, is hinted to have close links to Abu Dhabi Growth Fund. This new fund is headed by the erstwhile chief investment officer at ADQ, Khalifa Al Suwaidi. According to the LinkedIn page, Suwaidi became the CEO of ADG in June. He also serves as the Chairman of Agthia Group PJSC, a local food company, and Senaat, controlled by ADQ. Suwaidi is known to be a senior person in the Emirate’s establishment.
ADG has employees in the range of 11 and 50, according to its LinkedIn page. Its office is in the same building as ADQ, and it is not clear yet whether ADQ would oversee this fund or own it.
An ADQ spokeswoman was unable to comment while the ADG call went unanswered.
High Returns
According to ADG’s website, it will invest in venture capital, private equity, public equities, and hedge funds. The fund is to pursue a different investment strategy that will give its shareholders and government high ROI. The high returns strategy with lower risk resembles its asset management firm Mubadala Capital.
Mubadala Capital is the first fund to manage third-party funds. It keeps scouting for new opportunities abroad for PE to VC funds. This is when sovereign funds park the surplus funds of the government abroad for better returns for future generations.
“Establishing the ADG fund made better sense as it provided market reach and flexibility which the bigger ADQ would not have achieved,” said Deigo Lopez, the Managing Director of Global SWF, a data and advisor firm.
ADQ has an estimated $110 billion in assets, including a 45% stake in Louis Dreyfus Company BV. It has focused on four sectors that are considered vital for the Emirate’s long-term future, such as health care and pharma, energy and utilities, mobility and logistics, and food and agriculture.
Lime and Indonesia
The San Francisco-based start-up, Lime, has been committed $416 million in convertible debt funding by ADG. Uber Technologies, Highbridge Capital Management, and Fidelity Management & Research Company are also investors in Lime.
The next day after the lime deal, the Indonesia state wealth fund signed up with ADG for high yield financial instruments investments. It was a part of the broad commitment by the UAE to invest $10 billion in Indonesia. According to Indonesia Investment Authority, the ADG was established by the ADQ.
Abu Dhabi is home to 6% of the global oil reserves. The coming up of ADG among the sovereign vehicles is expected to add up to the coffer of UAE’s capital with energy revenue.
According to Lopez, having a subsidiary that is similar to Mubadala helps to raise third-party funds. This completes the portfolio and allows one to invest in diverse areas such as private equity, hedge funds, and early-stage venture capital. He expects ADG to follow a similar model with support From ADQ but with a high degree of product and market flexibility.
