Dubai Launches New US$80bn+ SWF, Emulates ADQ

Dubai is creating a new sovereign wealth fund, bringing together chunky assets in part-privatized companies similar to Abu Dhabi’s ADQ, which has used its infrastructure-based capital to diversify globally, including into private equity.

The new Dubai Investment Fund (DIF) will acquire stakes in the emirate’s utility company, DEWA, toll operator Salik Co, and Dubai Taxi, all of which were privatized over the past year as part of a program of divestment of 10 emirate-owned assets. The combined value of the government’s stakes in the three named assets alone is around US$34 billion. The US$47 billion Dubai World, which largely comprises port operator DP World, will be affiliated under the DIF umbrella but retain its legal identity. As such, the DIF’s total AUM could range between US$80-100 billion. It will be chaired by Deputy Ruler of Dubai Sheikh Maktoum bin Mohammed bin Rashid al-Maktoum who also serves as the UAE’s finance minister.

Dubai’s existing sovereign wealth fund community comprises three state-owned holding companies with total assets under management of US$423 billion: Investment Corporation of Dubai (ICD), Dubai World and Dubai Holding.

While these Sovereign Development Funds can seem similar, all three have slightly different missions and structures that makes them unique: Dubai World is a thematic global investor (just like Abu Dhabi’s IPIC was); ICD seeks financial returns overseas despite having a significant domestic portfolio, including the airline Emirates (just like Abu Dhabi’s Mubadala); and Dubai Holding is just a family office owned by the ruler. There is just no equivalent to ADIA in Dubai. The new fund emulates the role of ADQ in that it brings together much of the remaining state-owned assets with a view to divesting on the public markets, yielding dry powder to diversify the portfolio – very likely, into overseas markets.

ICD is currently the main investment arm of the emirate’s government, incorporated in 2006. It was seeded with a portfolio of assets from the Department of Finance’s Investment Division. It now spans six segments: financial services, transportation, energy real estate, hospitality and retail. It is chaired by Dubai’s Ruler Sheikh Mohammed and the lines between the wealth of the ruling family and ICD’s portfolio are often blurred.

Dubai World is focused on transport & logistics, drydocks & maritime, urban development, investment & financial services and recently absorbed 100% of its main asset, DP World, after it listed for 13 years to avoid restrictions related to failed payments to creditors. DP World was formed in 2005 from the domestic terminal businesses Dubai Ports International and Dubai Ports Authority with a mission to invest overseas. Most of the other assets were absorbed by DP World itself, so the lines between it and DP World have become increasingly blurry.

Dubai Holding was launched in 2004 by the Dubai Government and the ruling family to consolidate their diverse portfolio of assets and projects and to lead Dubai’s large-scale infrastructure and investment projects, with a particular focus on real estate. Through its subsidiaries, Dubai Holdings invests in luxury hotels and resorts, construction, retail and, to certain degree, telecommunications (du).

Source: globalswf.com