“We want Mubadala to be a pioneer as the entrepreneur organization for the government of Abu Dhabi.”
Saeed Al Mazrouei is the Deputy Chief Financial Officer of Mubadala Investment Company, a sovereign wealth fund for the government of Abu Dhabi. In this role, he oversees the group-wide finance function, supporting the delivery of the company’s growth strategy and ensuring the successful execution of strategic transactions and financing projects, as well as supporting the company’s business units in various acquisitive transactions and assets monetization.
Mubadala was created to focus on investing in and growing a more diverse business ecosystem within in Abu Dhabi. This includes working with American organizations like the Cleveland Clinic to build a world class healthcare system in Abu Dhabi.
One of the keys to creating the scale diversification is based on developing an entrepreneurial environment within Abu Dhabi and the UAE. This movement is important to creating sustainable jobs. “We are trying to build an ecosystem in the Emirates of Abu Dhabi; how can we help entrepreneurs, how can we help venture capital come and establish businesses to grow out of Abu Dhabi?”
LISTEN AND SUBSCRIBE
SPEAKER
Saeed Al Mazrouei
Deputy Chief Financial Officer
Mubadala Investment Company
MODERATOR
Anthony Scaramucci
Founder & Managing Partner
SkyBridge
EPISODE TRANSCRIPT
Rachel Pether: (00:08)
Hi everyone, and welcome back to SALT Talks. My name is Rachel Pether and I'm a Senior Advisor to SkyBridge, a global alternative investments firm, as well as being the MC for SALT. A thought leadership forum and networking platform that encompasses finance, technology and politics. Now SALT Talks has a series of digital interviews with some of the world's foremost investors, creators and thinkers. And just as we do at our global SALT Conference series, we aim to empower really big, important ideas and provide our audience a window into the mind of subject matter experts. Today I am very excited to be speaking to Saeed Al Mazrouei. Saeed is the Deputy Group CFO of Mubadala Investment Company. One of the world's largest sovereign wealth funds. Before his current role, Saeed was seconded from Mubadala, to spearhead the launch of the Debt Management Office within the Abu Dhabi Department of Finance.
Rachel Pether: (01:05)
During this time he led more than $30 billion worth transactions, including a $10 billion joint venture between the Russian Direct Investment Fund and the Department of Finance. He sits on the board of several companies, including, but not limited to Abu Dhabi Commercial Bank, Cepsa, Abu Dhabi Future Energy Company, Cleveland Clinic Abu Dhabi, and the Abu Dhabi Pension Fund. Saeed, welcome to SALT Talks.
Saeed Al Mazrouei: (01:32)
Thank you for having me Rachel, pleasure to be with you.
Rachel Pether: (01:36)
Now. I severely truncated your biography and I apologize for that. So maybe let's just start by tell me a bit about your personal background and how you ended up in your current role in Mubadala.
Saeed Al Mazrouei: (01:49)
Maybe in short as they guess you have given a good brief on my bio. My name is Al Mazrouei. Have been with Mubadala actually since 2007, a few years after Mubadala was started in 2002. I started my career in the investment banking side here in the UAE for a couple of years before joining Mubadala. And then I joined the acquisition team. It used to be called the acquisition team back in 2007, was under the leadership of Harney who is also today, the executive director of Mubadala capital here in Mubadala. Then I decided after a few years to change my career for a new opportunity, as you mentioned to move to Department of Finance on secondment basis to establish the Debt Management Office. In 2009, with the global financial crisis, it was really critical and important for the government to establish an office that will be the window for all debt issuances for the government, as well as managing the rating of the government or the sovereign rating with the rating agencies.
Saeed Al Mazrouei: (02:59)
We have done a couple of issuances for the government, but we were also lucky at that time in 2010 and 2011, we saw increase in oil prices at 110, 120. We pivoted the focus more into looking into special projects here in Abu Dhabi. And if you would recall on the back of 2009, we had a couple of credit situation and insolvency situation either on the banking industry or on the real estate side where the government needed to actually intervene with these entities. I had the pleasure at that time to work with the chairman of Department of Finance on these couple of projects. And we were very successful in providing funding and liquidity either on the banking side or also on the real estate sector, which were large sectors for us at that time for the Emirate of Abu Dhabi.
Rachel Pether: (03:53)
Excellent. And I want to come back to the points about the debt capital markets a little bit later on, but you obviously work for Mubadala now, which is one of the world's largest sovereign wealth funds is not your typical sovereign wealth fund. And we can go into a bit more detail on that later, but we have quite a geographically diverse audience on the call today. So the benefit of those that might not know so much about Mubadala. Could you give an overview of its investment strategy and focusing.
Saeed Al Mazrouei: (04:22)
Of course I always try. I mean, Mubadala is very complicated organization. But let me simplify it, maybe for our audience into Mubadala Development Company and then Mubadala 1.0, and then Mubadala 2.0. So Mubadala Development Company was established back in 2007, and that goes all the way to 2017. And the purpose of Mubadala when it was created at that time we had Abu Dhabi Investment Authority, which was at that time, the largest sovereign wealth funds for the government of Abu Dhabi. And it's a fund that focus on financial investments and drives all their investments based on asset classes diversification or asset classes strategy. The government in 2000 and 2002 were looking for someone who can build businesses, build sectors for the Emirates or the Emirates for Abu Dhabi and for the UAE economy. And the main purpose was at that time is to create an economic diversification with sustainable jobs.
Saeed Al Mazrouei: (05:25)
In 2002, we had the first great projects for us, which was Dolphin. In 2002 energy sources was critical for us when it comes to power. As an energy security for us, Dolphin gas pipeline have helped and support the government of Abu Dhabi to actually provide enough gas supply for the power sector. And that was an iconic, remarkable project for us. Also, I can give other few projects there were, I believe have been key milestones that the government of Abu Dhabi as a shareholder of Mubadala was able to achieve. The leadership here in Abu Dhabi were looking for a world-class health system or world class health organization that can actually help and support the UAE national to be treated in Abu Dhabi or in the UAE vis-a-vis giving ... taking them abroad either to Europe or North America.
Saeed Al Mazrouei: (06:28)
And the vision is how can we have that world-class healthcare facilities in Abu Dhabi. And the launching of that was basically how can we partner with CCAD, with Cleveland Clinic in the U.S. by having CCAD or Cleveland Clinic, Abu Dhabi here in Abu Dhabi. What's really interesting now, after a few years after opening Cleveland Clinic, we have seen high quality feedback from individuals and patients either from Abu Dhabi or the region, that basically the vision that was said that instead of people traveling abroad and getting that high quality health care services to be delivered to them in Abu Dhabi, and we were able to achieve that vision, and we continue to improve on that.
Saeed Al Mazrouei: (07:18)
On recent transactions or recent initiative that we came up with, especially on the technology side. I think it's becoming a hot topic, especially with what Mubadala have been doing either with Vision Funds or direct investments that we are doing on the technology sector. And I guess we will touch base on that. In the coming few minutes is up 71. We were trying also to build an ecosystem in the Emirates of Abu Dhabi, how can we help entrepreneurs, how can we help venture capital to come and to establish businesses and to grow businesses out of Abu Dhabi? Last but not least, the catalyst fund, the asset management business sector we can grow it here and in the UAE. And I guess we have been trying now to deploy capital as an LP investments to give a Seed Capital either for private equity or alternative investment funds, or even on the equity capital market to establish their offices here in Abu Dhabi through a global financial market.
Saeed Al Mazrouei: (08:20)
And to sure, basically that ecosystem develop over the year, that was from 2002 to 2017. And that culture Rachel, we care about as an organization or as more Mubadala because we want to continue to be pioneer as Mubadala, as being the entrepreneur organization for the government of Abu Dhabi. And we want to continue to create sustainable jobs and economic diversification. Post the financial crisis in 2015, when we show low oil prices, the government started to give direction by consolidating sectors, either on the banking industry or even on the real estate side. And you would recall in 2017, there was an announcement, a merger between IPIC, The International Petroleum Investment Company and Mubadala Development Company. And here where I call it Mubadala 1.0, the Mubadala Investment Company, were established. Were basically the government said "We have an overlap in the oil and gas sector, why don't we create one unified window to ensure basically we don't have competition from both organizations. And at the same time you needed that scale to have a presence on the investment community." One year later it seems post the merger with IPIC.
Saeed Al Mazrouei: (09:42)
The shareholder basically realized that scale diversification is really critical and important by having a really large sovereign wealth funds similar to two ADIA. The decision came in 2000, I guess, to 2018, basically Abu Dhabi Investment Council to join Mubadala Investment Company, which is, I call it Mubadala 2.1. And that created really the large scale for us. Now we're around $230 billion company. We have created enough diversification in our portfolio, and we were able to manage to create a sustainable return for the shareholder. Abu Dhabi Investment Council, it's basically a full subsidiary owned by Mubadala. That subsidiary is being, have taken the endowment business model on the last 10 years, because they were established in 2000 and 2007. And their portfolio is a fund the fund were basically their business or their investment strategy focus on investing in asset classes through funds, through external fund managers who manages their capital on their behalf. This is in summary what Mubadala Investment Company is.
Rachel Pether: (10:58)
That's great. And I want to pick up on one of the points you made about that entrepreneurial spirit. A couple of weeks ago, we had had Alama hit up in the battle air space on SALT Talks, and he was telling this great story about how Strata had adapted their manufacturing line that was producing aerospace plant to create a 95 mosques and actually become an ex-altar. How, can you give me some other examples of how some investments have adapted during the pandemic in recent times?
Saeed Al Mazrouei: (11:34)
It Rachel, I think my view on this, I mean, post COVID-19, that's my personal opinion on it and what I have heard from others through our network. I think a couple of themes that I see them going to grow over the next few years before I touched base on Strata and other examples. Clearly digitalization is going to be disrupted across different industries, not just on the UAE, but across the globe. Working from home is something that we see it as a trend. And I don't think post COVID 19 era people will fully come back to work because I think working from home has created a lot of efficiencies for many individuals who are being able to cope with the work from staying at home. And I see that a big risk on the real estate side, especially on the commercial side.
Saeed Al Mazrouei: (12:30)
Less business travels I think that will have also its impact on the aviation industry. And I don't know how much disruption and production and profitability of these sectors. Consumer behavior has changed. And this is, will take me to one example before we touched base on Strata. As you mentioned, I sit on the board of ADCB and we have seen a lot of statistics post COVID 19, that the behavior of consumers have changed from the traditional way of doing banking by going to the branch and getting their services done physically. Today, the cash transaction have prompted to levels that we have never seen them pre-COVID 19. Usage of credit cards have increased. Also we have data and access to how much people are active on the application and the time that they spend on banking application, that have skyrocketed. All this gives you an indication that basically consumer have built the experience of how to use applications.
Saeed Al Mazrouei: (13:36)
They are satisfied with that customers because also we are on service for our customers and the service have shown very positive signals that customers, they want to continue to use that hence that will create an opportunity on the banking industry, because remember, if there is no credit growth, you will be focusing on cost optimization and reducing your cost income. And that at the same time, as it's being profitable for the bank, improving the return on equity, that also would reduce the number of jobs as you are starting to close branches, or to have branch closures, because you really don't need all this number of brunches. If retail customers more specifically are happy and ready to use all these online applications. On the retail side, I think the retail is going to shift completely from shopping malls to online. And maybe we have seen it within our families, with my wife and with friends that people, I mean, personally, I use not to shop online, usually go and buy consumer goods by spending some time on the shopping malls.
Saeed Al Mazrouei: (14:46)
Now you are forced to use Amazon and other online applications because of the COVID, because of the quarantine and the less movement that we see. So Strata is another good model to me that how the banking industry, how the retail industry, how these companies will change their business model, because you really need adapt yourself to the new era, because to me banking, if we're not going to be spending on digitalization, I think we are going to be lagging behind as a bank because customers are going to be demanding more technology, more applications to be in place. That's what Strata I think went for because yes, you are an aircraft composite structure manufacturing company, but on the long term especially if there will be a slow down on aircraft purchases then also you, the supply chain will reduce with that minimal growth on the aircraft manufacturing sector.
Saeed Al Mazrouei: (15:49)
So you really need to adapt yourself how you can pivot by creating new business products or creating a new project for you, be it at 95, or even to take a step back and to say, should I focus on personal protection equipments that basically can be a new business lines for me to cover for any losses that I potentially could have from the airline industry?
Rachel Pether: (16:18)
No, that sounds really interesting. And I want to actually just follow up on something that you said previously about this will Mubadala Development Company was more focused on economic diversification and job creation within the Emirates, obviously the UAE economy, I guess, like most economies have taken a hit during the pandemic. Will Mubadala 2.0, look to invest more locally, again, to support the regional economy, or how do you see that playing out in terms of investment strategy?
Saeed Al Mazrouei: (16:53)
We, as an institutions, we have been always in the centric of our strategy, always Abu Dhabi and the UAE, economic diversification has been always in our mind, whenever we see opportunities, whenever we see that Mubadala can play a role on that, we will continue to play that. Because it has been always mentioned by our senior managing director that, the culture of being a sector builder or a business builder, something that we need to continue to maintain as a culture, because that's our roots. And that's how we evolve as an organization. As maybe you have mentioned post COVID 19, I think data and statistics, they don't really look good in terms of what numbers are we going to see in 2019, I guess we going to see the GDP dropping by six to 8% this year, and maybe hopefully a potential of a growth of around 3% next year as you know, the UAE GDP has too large external factors that is impacting our growth.
Saeed Al Mazrouei: (18:02)
One is oil prices, as revenue represents oil revenue represents one third of our GDP and that volatility would have a significant impact on our growth going forward. Also, there are sectors be it retail, hospitality, real estate sector. Those sectors in combined, I think also they represent one third of our GDP. What's really important here for us is basically the international traffic that comes to the boy and to the UAE. Without this, I think the over supply of the retail or the real estate sector or the hospitality, it won't be covered by the local demand, hence the programs that are being set by the government related entities, be it Mubadala or other government related entities. And Dubai will have to continue to support the UAE economic growth by having new programs and new industry that will basically revive these industries to come back post COVID 19.
Saeed Al Mazrouei: (19:13)
One good example of that is Export 2020, which is going out to be Export 2021. It's hopefully it's going to take place next year, but that's a risk factor also that if it gets delayed again by another one year that is a risk on the UAE economy because it's going to take out many of visitors that they were supposed to plan to come to the UAE, but let's see how the virus will play. And we're going to see a vaccine by the end of the year.
Rachel Pether: (19:47)
Yes. Inshallah fingers crossed. I'm just interested when you talk about Mubadala 2.0, obviously across a lot of different asset classes, a lot of different geographies. How do you view the world when you break it down and to say for the economies will separate geographies?
Saeed Al Mazrouei: (20:05)
Maybe, I don't know, let me, maybe I think, why don't I give you some overview of our strategy and then where you feel you want me to speak more. I'm very happy to also to double click on specific areas, but Mubadala, even pre-COVID 19. I think our strategy has two folds. We spoke about the first fold, which is basically the local investments. And as I mentioned, this is on the core of our strategy and we'll continue to invest on the local economy where we see it's relevant for Mubadala and commercial basis. And we will continue support to help economic diversification and creating sustainable jobs here in the Emirates Abu Dhabi or in general in the UAE. But for us internationally, we will continue as an institution to grow and to manage our portfolio.
Saeed Al Mazrouei: (21:02)
We'll continue to enhance the resilience of our portfolio and manage the volatility of that portfolio to ensure basically we achieve an acceptable risk adjusted the retail for our shareholder. Tactically, maybe on the last 18 months or 24 months. We have embarked on a strategy on specific sectors. I'm going to come to those sectors, is to look for specific funds within the alternative investments, either be it an infrastructure on the private equity, where we invest with them through LP investments. We have a strong partnership with them, and we do a lot of co-investments that have turned to be good investments for us so far on the last 18 months of deploying this capital.
Saeed Al Mazrouei: (21:53)
But maybe let's double click now into sectors and asset classes. On the sector side, Mubadala is trying to focus on couple of sectors, technology, life sciences, consumer and financial services. On the technology side, maybe we have seen our investments a few years back with Vision Fund. We have direct investments either in North America and our San Francisco office to look into investing in venture capital, small ticket size, taking a portfolio strategy by seeing what could be successful. Also, we have a fund that is dedicated to Europe and clearly for us the themes there are mobility autonomous is something that we see it going to grow. And we will see a lot of capital going to that sub sector.
Saeed Al Mazrouei: (22:52)
Robotics is another area of an interest for Mubadala and energy storage. Those are the three or four themes that we continue to look to see if there are opportunities. And the reason for that is the technology sector will continue to grow over the next 10 years. We see a lot of capital and knowledge going toward that sector. Clearly after post-COVID-19, after we saw the market crashed a few months back ... we saw basically how the big five technology companies actually hold the market to achieve levels above 3,200 or 3,400 levels. So that's an area that we will continue to invest in. Life sciences and consumers. There are great themes there. Those two sectors have been growing around four to five sectors, more specifically in North America. So we see really till Wednesday, the themes, a lot of consolidation, because some of these sub-sectors of life sciences and consumer are very fragmented.
Saeed Al Mazrouei: (24:04)
So consolidation is a play. On the consumer side, disposable income has been growing in North America. And clearly we have, I mean, latest data have been showing household savings past 1 trillion, which is a good indicator that households have been de-leveraging and having saving, deploying that on financial assets, which basically it will give them the power over the next six to 12 month post COVID-19 to consume that. So consumer spending either on services or in goods, we're going to see something that will grow. 70% of the U.S. GDP also represented by consumer spending. So that will continue to be the play going forward. On the life sciences, I think there is people have the capacity to have health insurance, especially in North America. So spending on healthcare will continue, especially with the effect of COVID-19.
Saeed Al Mazrouei: (25:06)
Also the feasibility on the cash flow, especially with the investments that we have seen a lot of feasibility and very health, but the margins. Those themes have really attracted us to say, we want to focus on those sectors that makes a lot of sense for us to look at them and to invest with our partners, the private equity funds. Last but not least, financial services. We have been developing a strategy on financial services here in Mubadala and hopefully in the next couple of months, maybe it will be launched at the beginning of next year. It's a lot of sector, it represents almost 6% of the global GDP. It has been growing at four to 5%.
Saeed Al Mazrouei: (25:51)
The banking industry has been highly regulated post the GFC. So what's the interest here is actually many of the bank starts to spin off a lot of their non-core assets that have an impact on their capital adequacy ratios. And that's creating an opportunity for us. So for us, we're looking into investing in life insurance, we're looking for corporate brokers and general insurance. Also consumer finance, as I mentioned on how household starts to de-leverage and having savings, consumer finance near prime is an area that we like. FinTech is a big play with with payments. So those are the couple of sub-sectors that we're looking to invest in and the team are working on that strategy. And hopefully by the beginning of next year, we see the launch of that strategy.
Saeed Al Mazrouei: (26:43)
That's from a sector point of view, on the asset classes, real estate and infrastructure will continue to be an attractive sector for us because of the feasibility on the cash flow and the low beta that reduces the volatility in our portfolio. Renewable is a big thing for us, especially in Masdar. I think with energy transition ESG, those two big topics that have been pushing international oil companies to shift from IOCs to become an energy company. I think there will be more renewable projects and renewables, frankly speaking starts to become very competitive from a pricing point of view and that is creating an opportunity for renewable projects to get a bigger market share vis-A-Vis the other energy sources.
Saeed Al Mazrouei: (27:35)
Last but not least, from a geography point of view, maybe you have seen our investments in Asia, more specifically in China and India be it reliance geo or reliance retail and our SIP team, the Sovereign Investment Partnerships already investing in China. And we like both geographies or both countries because of the GDP growth that we see increase in wealth and wealth distribution. The urbanization rate, a pace that both countries are going through is actually creating an opportunity for us. Also, we have been very lucky in India also to partner with Reliance, Reliance as a very credible partner, a large corporation, have a very successful track record and execution capabilities. And we were lucky with other financial institutions and sovereign wealth funds to invest either on Reliance Geo or Reliance Retail. And definitely North America will always be an area that we will invest in, because of the size of the economy and the opportunities being created across different sectors in the United States.
Rachel Pether: (28:45)
There were so many things that I would like to pick up on there, and we've already had a lot of questions coming in from the audience and broadly they tend to some of the sectors or countries that you've just discussed. So I'll try and break them down accordingly. With regards to healthcare, are you mainly looking at that from a financial investment focus or are you also looking to bring the technology or the investments to the UAE? And the recent example I'm thinking of here is science 87, the clinical trials platform. So now those types of investments, are they things that you actually want to back to Abu Dhabi? Is it more just a financial investment?
Saeed Al Mazrouei: (29:30)
See, I think we need to segregate between the international investments and the national investments we do, but there is a coordination there. So for us, everything on the international side, it's purely driven by the expected financial returns that we are going to achieve either on direct investments, LP investments or our core investments. But at the same time between our local team, if they realize basically there is something that is really interesting, and that makes sense for us to establish it here in Abu Dhabi or in the UAE, you would see that coordination between the international team who have done the transaction with the local team to see if we will be able basically to copy or to paste this to reflect or to place something like Science 72 to be here in the UAE.
Saeed Al Mazrouei: (30:25)
But that's not the only example. I think there are many transactions that we have done globally that basically when we feel it makes sense and financially it makes sense for us to bring it here to Abu Dhabi or to the UAE. Definitely, that creates an opportunity for us to partner either with the government or to partner with the private sector to launch those projects here in Abu Dhabi.
Rachel Pether: (30:54)
Right. And there's actually a question that's come in from Kim Lustig which kind of ties in some of these things then points you've just made. Given your ownership or involvement with global foundries and ACA, do you see Mubadala bringing any large scale technology infrastructure investments into Abu Dhabi? You did touch on sort of data centers. Do you see those data centers or hardware manufacturing being brought into Abu Dhabi?
Saeed Al Mazrouei: (31:24)
Rachel, I think that the short answer, if it is relevant and commercially make sense for us to bring it to Abu Dhabi to the UAE absolutely we are going to bring it. I think we brought a lot of services industries, I think technology and the industry is more complex nature because of its complexity, but generally speaking as a vision or as a direction for us as an institution, we always try to see if there is a possibility that we can replicate something here in Abu Dhabi or in the UAE. And that makes sense, commercially we will definitely bring it.
Rachel Pether: (32:08)
Excellent. And I do want to take a step back actually and ask some Mubadala questions, but just another quick question, that's coming from the audience. And you mentioned financial services as a sector, as well. Is digital assets, an area that looking at, and what is your exposure to this portion of financial services?
Saeed Al Mazrouei: (32:31)
I mean, I want to explore in general our exposure, if I would exclude the national banks here, we own a large stake in First Abu Dhabi Bank, and Abu Dhabi Commercial Bank. Our waiting on the financial services relative to the overall of Mubadala's portfolio is very minimal. And that was the rationale behind this, why we have not entered the financial services sector. And especially it has that growth of four to 6%. It has been growing at 4% and there are a long list of potential transaction that we see that we can execute as an institution. On that basis, the team in the next couple of months, maybe at the beginning of next year.
Saeed Al Mazrouei: (33:26)
And that we'll touch base on the sectors that I have mentioned either be on the Fintechs or payment, but large part of that as we spoke that the sector itself, we like it a couple of sub-sectors of that. It's a priority for us. But really depending on how that strategy will evolve in the next couple of months. And what's the right start for us. Are we looking to do LP investments with funds and then do the core investment? Or are we going to partner with private equity right away to do co-investment opportunities? The picture today is not clear because we're still working on that strategy.
Rachel Pether: (34:12)
So you mentioned going into things as an LP, and co-investment. One of the other reasons that Mubadala isn't your typical sovereign wealth fund. And this ties back to the entrepreneurial point is that you do manage good passion capital. You're one of the first, I think the only sovereign wealth fund in the world to do so. Can you talk a bit more about that program and how you see that evolving over the short to medium term as well?
Saeed Al Mazrouei: (34:39)
Maybe we talked about how Mubadala has the spirit of trying to come up with new ideas, right? And we have this space of thinking outside the box and we don't really shy away from those ideas. So the team who have worked on managing third party capital came with that idea. And at that time it makes a lot of sense because one, we will be the first one as a sovereign wealth funds to manage their party, but not just that, the reason, but also it validates many things. It validates your institutions, and also it validate your knowledge, it validates your reliability as an institution to manage third party capital. And also it gives the opportunity for some part of Mubadala team to get to be on the other side of the fence where they're not managing one shareholder money or the government money, but they manage other financial institution money and they get scrutinized for managing those funds.
Saeed Al Mazrouei: (35:55)
I personally believe it's a great idea. And I think it makes a lot of sense because that asset management business, it can be grown to other asset classes and it could, it's not going to become the size of Mubadala or sovereign wealth funds, but also you could sell a GP as Mubadala to other financial institutions, either from the region or international and you will continue to grow that. And it could be a home grow and asset management business that Mubadala or a sovereign wealth funds have created. And at the same time they have investments and footprint across the globe.
Rachel Pether: (36:32)
No, I think it's always great to see how Mubadala's evolving like that. And certainly when you have that third party assessment or analysis, it's really a verification of what you're doing. I guess there's another, well sort of the initial part of Mubadala's journey into this transparency and taking on more external stakeholders was when you went to the debt capital markets. And I know you're quite active in the debt capital markets last year, obviously historically low interest rates. What sort of a cost of funding are you trying to achieve? And how do you look at the debt to equity ratio from Mubadala?
Saeed Al Mazrouei: (37:08)
So for us, I think the debt capital, I mean Mubadala have started that program back in 2009. And we look at that as a source of funding for Mubadala and managing our liquidity. Mubadala managing their portfolio either through asset divestments and monetization. And redeploy that new capital into a new investments. Also, there are government injection from time to time, historically Mubadala have, basically government have stopped that injection a couple of years ago. And now Mubadala is self-funded, or it comes from dividends that come from the large assets that we have today, be it the world of SEBSA, Borealis, Nova and OMV. So that for us is critical in terms of source of funding. If you would recall, 10 years ago, back in 2009, interest rate environment was different. Cost of funding was really high, and we started to build the portfolio of Mubadala when it comes to fundraising.
Saeed Al Mazrouei: (38:10)
And at the same time, if you would recall, also IPIC at that time it's independent from Mubadala and they have been doing their own debt funding. We embarked on a strategy on the last 18 months to really benefit from the advantage of low interest rate environment. So we have raised around $7.5 billion. Back in November, 2019, we raised $3.5 billion. And last May during the COVID crisis, we raised $4 billion. And the main reason for us is to create liquidity, a dry powder for the organization. But also we were able to bring the cost of funding substantially down. We were North of 4% today, I think we are close around 3.5%, and we are targeting to bring that below 3%. Relative to potential retains that Mubadala can achieve on the future, especially on the alternative investment asset classes on a double-digit higher. At the same time, the duration of portfolio today is around eight years.
Saeed Al Mazrouei: (39:16)
It used to be around six years before we raised 7.5 billion, but we continue to refinance any expensive debt to ensure basically our duration is North of 10 years, that will give the opportunity for the different investment teams within Mubadala to have the runway and to have the time to deploy capital, to manage those assets with enough time to create value for the next maturity that we will have on average over the next eight years or 10 years. So hopefully we have been successful on executing on that strategy. We'll continue to optimize Mubadala's balanced sheet but what's really important for me is the attractiveness of our debt as an organization. As you know, we have a very close relationship with the government as the chairman of Mubadala is the Crown Prince of Abu Dhabi Sheik Mohammed bin Zayed. Also, we have a rating equal to the sovereign rating, which is a AA rating.
Saeed Al Mazrouei: (40:17)
We have demonstrated as an institution, a lot of transparency, governance transparency. We are prudent in nature. So from a risk management point of view, the balance sheet that we have in terms of a debt equity ratio is low teens ratio. So what that means basically relative to other sovereign wealth funds or financial institutions, or even the ratios that are thresholds ratios, that's being set by the rating agencies. We are way below those ratios, which is really positive, and that have really helped us as an institution to be very attractive when it comes to any debt issuances. A good example in May, in around May, 2020 we raised $4 billion. It was almost 10 times over subscription. Also in 2019, we were able to raise 3.5 billion. We got three times over subscription, and that is for us basically a demonstrate how attractive the debt issuances or the debt paper of Mubadala.
Rachel Pether: (41:29)
I just wanted to pick up on some of the points that might, I guess, that long-term focus and which is obviously helpful, given the majority of your assets in the private markets. I'm interested to know how you actually benchmark that fund when you're looking at returns, how do you actually benchmark Mubadala if you do it all?
Saeed Al Mazrouei: (41:52)
I think there are a lot of benchmarks really depends on which sector you are. And so today Mubadala started to apply a relative performance and certain KPIs that we have. And technically speaking, if we take an example the oil and gas sector or natural resources then there are specific benchmarks that are being set and agreed between the portfolio management team and the asset management team. And this gets applied as if you wish on relative basis and based on the score card, that's being set for example, natural sources or petroleum and petrochemical. And then you apply this across the different 13 or 14 sectors that we have today.
Rachel Pether: (42:50)
Excellent. And we actually, we are officially over time, but we do have about a dozen questions left so, I'm going to ask two more questions and I wanted to ask one that's right in your wheelhouse, given the work that you've done at the Debt Management Office as well. We've had an audience question coming in saying, "Firstly, fascinating interview Saeed, very insightful. Do you foresee Mubadala in the driving seat to issue in the domestic market and local currency supporting the local debt capital markets?" Thank you for your question as well.
Saeed Al Mazrouei: (43:22)
I am personally very keen to see the government of Abu Dhabi and the federal government to start establishing the local debt capital market. This is a dream for me to see it in reality because I think the private sector, our economy needed this. I believe our colleagues at the federal level and the local government, they have been working on this. And hopefully we see both governments start issuing that because you need that benchmark before you see government related entities, be it Mubadala or other institutions to come to the local market. But also at the same time, we are very cautious and mindful when it comes to impacting liquidity. If the liquidity is going to be there. And it makes sense for Mubadala to issue on the local market and support the local debt capital market. Absolutely. We will be supportive.
Rachel Pether: (44:15)
Great. Thank you, Saeed. And you've answered so many difficult questions today that I'm going to end on a nice, easy one. We have had actually a couple of people ask who or what inspires you, and please give the Saeed answer, not the Mubadala answer.
Saeed Al Mazrouei: (44:32)
To me the challenge that you live in everyday. I think it's something that makes me work more. I don't think it's the title and I don't think it's only the actual investments. I think I am lucky to grow up here in Mubadala and to see the competition within the organization. It's not on the bad way. I think as a team working together in a transaction to achieve a specific thing and that journey that you spend either on the buy side or on the sale side, a good example for us to me is the journey of Cepsa. We spent almost 14, 15 months from the start to them to the finish. And you go through ups and downs on that journey. Sometimes it works with you, sometimes it doesn't. And those challenges actually it makes me work hard, push myself more beyond the boundaries and to challenge my team and the different teams that we're working with in Mubadala.
Saeed Al Mazrouei: (45:42)
This is what really makes me happy everyday to come to the office and to work with the different functions in Mubadala, but absolutely the inspiration that by supporting your family and making your family happy, especially we're going through very difficult time these days, managing kids from home or even to give the credit to the women and especially wives, taking the lead on, taking classes from home and making sure kids are taking class from home, it's very challenging. So this is an area where it pushes me as a father or as a husband to work more and to make sure that the family is safe and to protect them.
Rachel Pether: (46:35)
Well, thank you so much, Saeed, yes I think you do have a lot of roles to fulfill, but I think that's a very optimistic note to finish on. And from my side, I just wanted to thank you so much. It's been such a pleasure. Talking to you today.
Saeed Al Mazrouei: (46:48)
Thank you. I really enjoyed the interview with you.