World

Abu Dhabi: $125 billion sovereign fund takes shape

15 Feb 2017 | By Vaneet Randhawa

Abu Dhabi is close to getting the 14th largest global fund with an approximate assets worth of $125 billion.

The global fund will be a product of the merger of 2 of its biggest autocrat wealth funds - International Petroleum Investment Co and Mubadala Development Co. PJSC.

The merged entity will be known as Mubadala Investment Co.

In context: Coming together of empires: Mubadala merger takes shape

21 Jan 2017Mubadala law formalized by Abu Dhabi Crown Prince

President His Highness Shaikh Khalifa Bin Zayed Al Nahyan declared a statute forming the Mubadala Investment Company.

This would compromise of International Petroleum Investment Company (Ipic) and Mubadala Development Company bringing together two of the most illustrious global investment powerhouse.

His Highness Shaikh Mohammad Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi will be the Chairman of the merged Board.

Ipic and MubadalaGetting to know Ipic and Mubadala

Ipic has a stake in almost 18 leading companies dealing with the hydrocarbon value chain like "exploration and production, shipping and pipelines, downstream petrochemicals, power, utilities and industrial services".

Mubadala has investments in "aerospace, oil, and gas, semiconductors, information and communications technologies, utilities, capital investments, real estate and infrastructure".

The services of the 2 groups pan across Canada, Europe, US and Asia.

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Reason behind the merger

ReasonReason behind the merger

One of the most likely reasons behind the merger is the cost as there has been a rapid decline in oil prices.

Abu Dhabi intends to cut costs by this merger by combining the funds with common ventures in avenues such as energy, financial services, and health care.

This would also create "an industrial and investment powerhouse that has every intention to keep growing".

15 Feb 2017Abu Dhabi: $125 billion sovereign fund takes shape

What are sovereign funds?

A sovereign wealth fund (SWF) is a "state-owned" investment reserve that makes investments in real and financial ventures such as "stocks, bonds, real estate, precious metals, or in alternative investments such as private equity fund or hedge funds". Such funds invest internationally.