According to Ibrahim Ajami of the Abu Dhabi State Fund, Mubadala, UAE, becomes a global ATM as the West goes bankrupt.
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Five Years ago, after Washington Post columnist Jamal Khashoggi was killed in the Saudi consulate in Istanbul, virtue-signaling American finance executives withdrew from a Saudi Arabian event in Riyadh.
Private equity, venture capital, and real estate funds have now returned with hats in hand to tap into the Middle East’s enormous wealth, which has been bolstered by higher energy prices as a result of Russia’s invasion of Ukraine. This is because Western financiers are constrained by rising interest rates and a decreased appetite for dealmaking.
As big Western financial institutions race to open branches in the Middle East in an effort to attract local investors, it appears that money is the only thing that can truly mend old scars.
While the Middle East steps on the gas, the traditional backers of investment funds—pension plans and college endowments—are in retreat. The global shift to higher interest rates caused losses in the biggest parts of their portfolios—especially stocks and bonds.
Investors put $33 billion toward U.S.-based venture capital funds in the first half of 2023, less than half the $74 billion in the same period in 2021, according to PitchBook. Global fundraising for all private funds fell 10% last year to $1.5 trillion, according to Preqin—a decline many expect to continue. -WSJ
“Fundraising has become much, much harder over the past 12 months,” Brenda Rainey, an executive vice president at Bain & Co. who counsels private equity groups, said in a statement to the Wall Street Journal.
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But, not in the Middle East.
For instance, the Future Investment Initiative Institute, sometimes known as “Davos in the Desert,” which will be held in Riyadh this year, is charging $15,000 per person to attend due to the expected high demand, according to the Journal.
Public Investment Fund (PIF) pledges in Saudi Arabia have increased significantly from $33 billion last year to $56 billion in 2022.
“Now, everybody wants to go to the Middle East—it’s like the gold rush in the U.S. once upon a time,” according to fundraising advisory firm CEO Peter Jädersten of Jade Advisors. “It’s difficult to raise money everywhere.”
According to data collected by Bloomberg, there were 70 major bankruptcies in just 4 months this year, surpassed only by the years 2009 and 2020.
According to Ibrahim Ajami of Abu Dhabi state fund Mubadala, Gulf funds now have the upper hand in discussions because they are able to be “very thoughtful and selective” about things like holdings in the fund managers themselves or side-by-side investments.
The focus is on Abu Dhabi.
Sheikh Tahnoun bin Zayed Al Nahyan, the national security adviser for Abu Dhabi, is one of the most significant dealmakers to have emerged in recent months. He has used the nation’s $1.5 trillion investment fund to target Standard Chartered and Lazard as well as recent deals to purchase a $1.2 billion UK healthcare giant and a nearly $6 billion Columbian food company, according to Bloomberg.
Tahnoon assumed control of the Abu Dhabi Investment Authority (ADIA) in March as a result of a March personnel change. The $993 billion wealth fund, one of the biggest in the world, is currently second among regional rivals in terms of transaction spending since the start of last year.
Sheikh Tahnoon bin Zayed Al Nahyan, who was born in the late 1960s, just after Abu Dhabi’s oil discovery, has emerged from the exclusive UAE royal family circles to become one of the most powerful financial titans in the world.
He has been on a capital-injecting binge for the past few months, ensnaring billionaires like Ray Dalio in his vortex. Karen Young, a senior research scholar at Columbia University, claims that the leadership of the UAE has realized that money is its most significant source of statecraft. Today, Sheikh Tahnoon is the brains behind several economic statecraft instruments.
Over the past few months, Sheikh Tahnoon bin Zayed Al Nahyan has gained control of the largest sovereign wealth fund in the United Arab Emirates, expanding the assets he oversees to almost $1.5 trillion. He’s proceeded to bankroll billions of dollars in deals via an expanded empire of private and state entities. Drawing in titans of finance such as Rajeev Misra and billionaire Ray Dalio, Sheikh Tahnoon — one of Abu Dhabi’s two deputy rulers, the UAE’s national security adviser and brother to its president — has sought to invest in everything from technology to finance, with varying degrees of success.
Known to be a fan of Brazilian jiu-jitsu, cycling and chess, Sheikh Tahnoon now helms two wealth funds, the region’s most important private investment firm, the country’s largest lender and its biggest listed corporate. That’s made him the defacto business chief of the wealthy Al Nahyan family, with access to seemingly endless reserves of cash in OPEC’s third-largest producer — an unusual amount of financial firepower even in the oil-rich Persian Gulf.
Other major transactions Tahnoon was a part of included financing Rajeev Misra’s new $6.8 billion fund, a $10 billion fund focusing on tech prospects, and ByteDance, the Chinese company that owns TikTok. One of Tahnoon’s companies, G42, collaborates with Nvidia rival Cerebras Systems, which has just finished building the first of nine AI supercomputers intended to challenge Nvidia.
That so, Sheikh Tahnoon’s task is not without difficulty. The complex maze of international laws has proven to be difficult to navigate. With plans to join the BRICS alliance, Abu Dhabi is moving closer to Beijing, which is causing some concern in Washington.
A partner at the legal firm Cleary Gottlieb in Abu Dhabi, Lynn Ammar, issues the following warning: “The broad geographic scope is likely to continue to attract attention from FDI authorities, such as CFIUS, who may be concerned about potential information flow to China.” This occurs as the US intensifies its investigation of Chinese government-related deals and other foreign investments.
Furthermore, Tahnoon wears two hats—national security adviser for the UAE and de facto head of business for the powerful Al Nahyan family—integrating economic and geopolitical policy. According to recent reports, the UAE has made large investments in the economies of Asia and Africa, clearly indicating a focus on emerging markets.