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Abu Dhabi state fund plans aerospace, energy buys

Mubadala chief operating officer Waleed Al Muhairi said the ongoing credit crisis, triggered by massive subprime mortgage defaults in the United States, has sapped liquidity from companies, providing good investment opportunities for those with the cash to invest.

‘These are the precise set of circumstances where you see great deals, great value opportunities, and wherever we see them, you will see us going into the market,’ Muhairi said in an interview with Reuters on the sidelines of the Singapore Airshow.

A slew of sovereign wealth funds from the Middle East and Asia have bought up stakes in ailing western financial institutions in recent months.

Abu Dhabi is the United Arab Emirates’ biggest oil producer, controlling over 85 percent of the UAE’s oil output, and is reaping the benefit of crude oil trading near record prices.

The country’s investment firm said it was not planning further buys in financial institutions, but could slightly raise its 7.5 percent stake in the Carlyle Group, which it bought for $1.35 billion last September.

‘We’re extremely happy with our 7.5 percent and whether that increases slightly over time remains to be seen, but I don’t think we’re ever going to be a major or controlling shareholder of Carlyle,’ Muhairi said.

The Carlyle investment is likely to be a one-off affair as other institutions in the country such as the Abu Dhabi Investment Authority, which bought a 4.9 percent stake in Citigroup in November, have better expertise to manage such acquisitions, he said.

‘Financial institutions have never been a core investing area for Mubadala. We’re mainly industry and services and right now we’re looking at those opportunities,’ Muhairi said.

Industrial focus

Mubadala has diversified stakes in energy, telecommunication, aerospace, automotives, healthcare, real estate and ship building sectors.

Mubadala has bought stakes in US based Advanced Micro Devices, the world’s second-largest computer processor maker, and Swiss aircraft maintenance firm SR Technics in the last two years.

Muhairi said half of Mubadala’s holdings are in Middle East countries, and the rest invested across the world. It has controlling stakes in about 60 percent of companies it invests in, while 40 percent are minor stakes.

He said the firm is particularly interested in taking major stakes in aerospace and energy firms in Asia and the Middle East.

‘The centre of gravity in aerospace is really shifting to this part of the world, and a part of our strategy is capturing a portion of the MRO (maintenace, repairs and overhaul) and on the manufacturing side,’ said Muhairi, who holds a Masters degree from Harvard University.

Investments by sovereign wealth funds has raised concerns about their potential political motives among western countries such as the United States, Canada, and Australia, which are considering restrictions on their investments.

‘I think there isn’t a consensus yet. But in a free market economy, capital finds its own home. People believe these are opportunies to make money, nothing more, nothing less to that,’ Muhairi said.

‘Until the rules change, we’re happy doing what we’re doing. But we’re ready to react,’ he said, without elaborating.