It was the question Mubadala Investment Co.’s Camilla Languille couldn’t escape all week.
Legions of private market executives, deeply reliant on Middle Eastern sovereign wealth for fundraising, have been anxious to know how much of that money will keep flowing their way as the war in Iran drags on. The Milken Institute Global Conference, which wrapped up Wednesday, gave them their first public opening to find out.
“I’ve been asked that question several times this week,” said Languille, who runs the $385 billion sovereign wealth fund’s private equity portfolio. “My answer is: The strategy does not change. For the most part, when we set it we continue going straight even when the world around us changes.”
Yet on the sidelines at Milken, one of the largest financial gatherings since the war erupted, the picture sketched out by attendees was decidedly murky. Many claimed the spigot remains open, with some top executives making a concerted effort to prove their solidarity with the region, but it was clear their optimism came with caveats.
One executive bemoaned how a fund from the United Arab Emirates went silent when the war broke out, then slashed a funding commitment that was supposed to be in the hundreds of millions of dollars even though the transaction had already undergone extensive due diligence. The heads of at least two other private credit funds said they, too, heard they will get smaller checks — or none at all — from investors in the region. One financier stewed about a deal that’s been on hold since the fighting erupted. Another said he’s spent weeks trying to meet his investors from the Mideast, only to be repeatedly snubbed.
The UAE faced the brunt of Iran’s attacks, causing many executives to relocate temporarily, sometimes delaying decisions, people familiar with the matter said. For the most part, though, deals already underway continue apace.
One asset manager even received money from a Qatari fund while that Mideast nation was being bombed by Iran. Other executives mused about the opportunities sure to come from the billions of dollars that Gulf countries are expected to plow into bolstering their infrastructure and military defense capabilities.
And so Wall Street’s relentless march into the region is poised to continue. Firms are still enthusiastic about the Gulf, setting up offices and sending senior executives to meet with officials and scout out new deals. Wealth firm Partners Capital, which has about $75 billion in assets under management, is opening an office in the UAE, joining other recent arrivals including Bain Capital and Capital Group — the world’s biggest active fund manager.
“We are defined by the decades of stability that we have shown as a country and as institutions,” said Waleed Ahmed Al Muhairi, Mubadala’s deputy group CEO. His fund “will not be defined by a few weeks of disruption and volatility.”
This story is based on conversations with more than a dozen private markets executives, advisers and sovereign wealth fund officials, all of whom asked not to be named discussing non-public deals and fundraisings.
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Gulf states were going out of their way at the conference to present an air of normalcy, taking meetings with top executives, speaking on panels and hosting events for guests as they have in years past.
Many of the world’s biggest banks and private equity firms have spent decades cultivating ties with these players. But their ascendance on the global financial stage has kicked off a dash among other, smaller firms to try to forge connections with these sovereign wealth funds.
In the relationship-driven world of Mideast money, it’s that latter cohort that’s feeling the pinch. Gulf funds are likely to prioritize investors with longstanding ties as well as those that have continued to deploy capital in times of strife.
Take Blackstone Inc.: The firm has already unveiled two inbound deals in the region since the war began. Brookfield Asset Management Ltd. has also made a bold bet on the city’s real estate market in recent weeks.
The war has led to “areas where we need to double down our investment and our focus, and other areas where we might need to forgo and re-prioritize,” said Hadi Badri, CEO of the Dubai Economic Development Corp.
Even for bigger and more-entrenched firms, new fundraising is emerging as a pinch point. One banker who’s advising a buyout firm and a hedge fund on raising money in the region has seen Gulf wealth funds pull back on those commitments, even for money managers they previously backed. Another longtime adviser in the region said some funds are simply becoming more cautious and asking for more time to study a proposal.
There will be “a big realignment of capital flows,” State Street Corp. Chief Executive Officer Ron O’Hanley said at the conference, referring to the $3.2 trillion that Gulf states and sovereign wealth funds have deployed. “There will be investment opportunities, but the point is that, on a net basis, the amount of money coming out will certainly be lower.”
O’Hanley traveled to Saudi Arabia in recent weeks to speak to government officials there about their plans. His firm, which sees about 12% of the world’s capital flows, has offices in Riyadh and Dubai, and is sticking to plans to open a second hub in Abu Dhabi.
Fallout from the conflict “will now require re-prioritization of capital,” O’Hanley said, “and that will have long-term implications for the cost of capital.”
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