Page 81 - Aamir Rehman Gulf Capital and Islamic Finance The Rise of the New Global Players

CHAPTER 2 Entrusted Stewards 65

Mubadala’s CEO illustrated this phenomenon succinctly, noting that
“while ADNOC [Abu Dhabi National Oil Company] continued to
export oil and gas, and ADIA managed a diverse investment portfolio
abroad, Mubadala became responsible for orchestrating change from
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within the emirate.” The allocation framework involving oil compa-
nies, central banks, finance ministries, and investment vehicles (both
SWFs and GIVs) is guided by governments’ overall economic priori-
ties and objectives for longer-term development and competitiveness.

Private Operating Models
One key reason for creating specialist GIVs as distinct entities has
been to enable the organizational focus and culture required for alter-
native investments. States could, of course, have chosen to keep all
their investments in the hands of their generalist SWFs. However, cre-
ating distinct, focused GIVs brings the important benefits of fostering
specialist expertise and giving teams of investment specialists
autonomous platforms to mold according to the unique characteris-
tics of the asset classes and industries in which they invest. Generalist
SWFs, like endowments and pension funds worldwide, benefit from
mature organizations with sophisticated asset allocation models, rig-
orous macroeconomic and market analysis, and robust governance of
external asset managers. Private equity institutions, by contrast, ben-
efit from organizational agility, expertise in specific asset classes and
industries, and strong internal teams undertaking fundamental
analysis of specific opportunities. Specialist GIVs are better off as sep-
arate institutions, since the attributes that drive their success differ
significantly from those found in generalist SWFs.
In keeping with their mandates, GIVs often take strategic stakes in
their portfolio companies and work actively to add value in the compa-
nies they own. For example, IPIC holds a stake of 47 percent (bought in
stages) of the oil refiner Cepsa. A large chunk of that equity was bought
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from Santander in March 2009 for $3.8 billion. Since that acquisition,
IPIC has also acquired the firm Nova Chemicals for $2.3 billion in
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2009. Both of these investments are related to IPIC’s oil and gas exper-
tise and Abu Dhabi’s strategic focus on energy. IPIC can thus act as a
value-adding investor and a strategic buyer of energy assets rather
than simply as a passive investor drawing only financial returns.
DIFC Investments, whose investments support Dubai’s aspira-
tions to act as a global financial center, took a 28 percent stake in the
London Stock Exchange in 2007 and almost entirely bought out the