Abu Dhabi: Mubadala Capital, Aldar to Tap External Capital for $1 Billion Fund - Bloomberg
Mubadala Capital is preparing to raise third-party capital in its home market for the first time, expanding a model it has used abroad since becoming a rare sovereign wealth fund-owned entity to attract external money for alternative investments.
The asset management arm of Abu Dhabi’s Mubadala Investment Co. is partnering with Aldar Properties PJSC, the emirate’s largest developer, to launch a real-assets investment platform targeting opportunities in the United Arab Emirates and the wider Gulf region, according to a statement on Thursday.
The new venture, Aldar Capital, aims to raise $1 billion for its first fund next year with initial commitments from both partners. It will also target institutional investors, potentially scaling to several billion dollars of assets under management in the coming years.
“We have received significant inbound interest from a number of our existing investors who want exposure to the region,” Hani Barhoush, chief executive officer of Mubadala Capital, said in an interview.
Based in Abu Dhabi’s financial center ADGM, Aldar Capital will invest across residential and office buildings, logistics and other real assets. It will build equity and debt strategies to meet rising demand from regional and international investors, Aldar Group CEO Talal Al Dhiyebi said.
The platform will help transform Aldar from a regional developer, known for projects such as Ferrari World and the Formula 1 racetrack, into a manager of global capital, Al Dhiyebi said. “We want to be recognized as the partner of choice when it comes to real assets in the entire region.”
Aldar Properties is listed in Abu Dhabi and counts a unit of the $330 billion wealth fund Mubadala as one of its top shareholders.
Abu Dhabi’s appeal to billionaires, hedge funds and crypto executives has driven up demand for housing and offices, with apartment prices rising 14% over the past year, according to brokerage JLL.
The emirate is also investing in a Disney theme park, a Sphere arena, new museums and data centers expected to create thousands of jobs and lure new residents.
Founded in 2011, Mubadala Capital has accelerated dealmaking under Barhoush and now manages, advises and administers more than $430 billion in assets. Earlier this year, it sold a minority stake to TWG Global, an investment firm led by Guggenheim Partners founder Mark Walter and financier Thomas Tull. That followed its acquisition of Canadian mutual fund manager CI Financial Corp. in one of the largest privatizations by an Abu Dhabi entity.
Aldar Capital’s initial team will include staff from both Mubadala Capital and Aldar. It aims to start with up to 20 people and plans to expand further over time, Barhoush said.
Thursday, 4 December 2025
Buyout Giant KKR Signals Growing Ambition on Middle East Deals - Bloomberg
Buyout Giant KKR Signals Growing Ambition on Middle East Deals - Bloomberg
In October, over 150 professionals from KKR & Co. descended on Abu Dhabi. They huddled in conference rooms at the Mandarin Oriental and dined out in the desert, before traveling to meet with institutional investors across the region that now sits firmly at the heart of global finance.
Weeks after that off-site, KKR picked Abu Dhabi as the location for its third Middle Eastern office. For the $723 billion alternatives giant which pioneered the buyout industry, the moves spotlighted the growing significance of the oil-rich Gulf that boasts a young demographic, growing consumption and robust economic growth.
KKR was set up about five decades ago in the US, later expanding to Europe and Asia. The firm has had an office in Dubai since 2009 and started deploying capital into the region more recently, though executives are looking to dial up their presence.
“Once we decide that we want to go into a region, we operate more like a switch than a dimmer,” co-Chief Executive Officer Scott Nuttall told Bloomberg News in Riyadh on the sidelines of the Future Investment Initiative. “We want to invest more capital in and with partners that are here,” he said in an exclusive interview alongside two of KKR’s most senior regional executives.
The firm recently reported its second-highest fundraising quarter, a period where investment activity also rose sharply. Over the past year, it has deployed about $85 billion globally across asset classes. The Middle East accounts for a small proportion, but Nuttall pledged to scale up, “much like we’ve done in Europe and Asia.”
Buyout firms have been drawn to newly-ascendant Gulf economies that are trying to diversify from oil into areas like finance and artificial intelligence. Massive privatization programs are also seen as a lucrative opportunity.
But it’s also a delicate moment for alternative managers in the region. Many of the largest Gulf wealth funds — historically significant backers of the industry — have become pickier about who they work with. Some have sounded alarm over valuation practices and returns, while others say pockets of the market have become crowded.
KKR, for its part, has picked up the pace of dealmaking in the Gulf, which Nuttall said delivered “emerging markets growth for developed market risk.” It has invested about $2 billion over the past ten months, buying a slice of Abu Dhabi National Oil Co.’s gas pipeline network and a stake in one of the largest Gulf data center firms.
A Wide Lens
Other titans of global finance, too, have rushed in.
Brookfield Asset Management is now one of the biggest foreign investors in the Gulf, BlackRock Inc. recently signaled ambitions to significantly boost regional investments, while the likes of CVC Capital Partners Plc and General Atlantic have ramped up dealmaking. Executives from many of these firms will head to Abu Dhabi this month for the city’s annual finance confab.
KKR executives brushed aside concerns over competition, and said their ability to do a broader variety of deals offers an edge. The firm invests from a global pool of capital, allowing it to target bigger opportunities, according to Julian Barratt-Due, head of Middle East investing.
“Our mandate is very broad and flexible with respect to duration and cost of capital as well as size, governance structures, holding periods,” he said in the interview. “That gives us a really wide lens when it comes to deployment and it widens the addressable opportunity set.”
“Being able to play across that whole range helps,” he said.
KKR opened its first regional office in Dubai 16 years ago, followed by Riyadh in 2014. Co-founders including Henry Kravis have flown into Gulf cities for over three decades to raise capital and build partnerships with sovereign wealth funds. Nuttall himself is a frequent visitor, while former US General David Petraeus — chairman of the Middle East franchise since April — is a fixture at regional finance forums.
In all, it currently has 20 employees in the region, and recently set up an investment team led by Barratt-Due. “This isn’t a new endeavor,” Nuttall said. “I’d say what is a bit younger is the idea of investing capital in the region, not just taking capital from the region.”
That appetite for dealmaking has triggered a regional revival for the industry following the collapse of Abraaj Group, but it’s also ratcheting up competition for assets and a slice of the region’s billions. Even a flare up in the regional conflict over the summer and fluctuations in the price of crude haven’t deterred firms from continuing to set up local outposts and adding investment professionals.
“The Middle East is the world’s worst-kept secret,” said George Traub, managing partner at Dubai-based boutique Lumina Capital Advisers. “The likes of Brookfield have had an early mover advantage by getting access to a string of deals and others have taken note,” he said, adding that firms who may have been underweight are now recalibrating their approach.
Recent transactions have centered on sectors tied to the region’s growth. Brookfield invested in a Dubai-based education provider last year, while Permira and Blackstone Inc. poured money into a property classifieds website recently, in a bet that an influx of expatriates would continue to boost those sectors.
“From an investment standpoint, it’s a pretty interesting area, and there are a lot of things that rhyme with what we see in Asia,” Nuttall said. “And we’re the largest manager in Asia.”
Opening Up
Buyout shops started to change their approach to the region a few years ago when Gulf states decided to open up some of the marquee infrastructure to international investors. KKR and BlackRock were involved in the first such deal in the Middle East, when they bought into Adnoc’s oil pipeline network in 2019.
“Every country has ambitious economic transformation plans and are seeking foreign investments,” General Petraeus said in the interview. “The thinking is why hold all these assets on your balance sheet when an investment firm can come and buy some of it.”
Such transactions continue to present opportunities for buyout firms. Earlier this year, Saudi Aramco signed an $11 billion lease transaction with a group led by BlackRock’s Global Infrastructure Partners for assets linked to the Jafurah gas project.
Aramco is now considering plans to raise billions by selling assets including its oil export and storage terminals business. The action has spread further afield to places like Kuwait, where the state oil firm is considering leasing part of its pipeline network to help fund a $65 billion investment plan.
But the region can still be hard to crack for alternative asset managers. Auction processes can be less structured than in the West, businesses are sometimes more reluctant to cede control, and capital markets are relatively illiquid.
KKR executives are looking to lean on their local presence to counter some of those challenges. A significant portion of its deal pipeline comes from having conversations with local entities, Barratt-Due said.
“You need to be on the ground,” he said. “This is impossible to do if you’re sitting in London or New York, you just need to meet with people.”
In October, over 150 professionals from KKR & Co. descended on Abu Dhabi. They huddled in conference rooms at the Mandarin Oriental and dined out in the desert, before traveling to meet with institutional investors across the region that now sits firmly at the heart of global finance.
Weeks after that off-site, KKR picked Abu Dhabi as the location for its third Middle Eastern office. For the $723 billion alternatives giant which pioneered the buyout industry, the moves spotlighted the growing significance of the oil-rich Gulf that boasts a young demographic, growing consumption and robust economic growth.
KKR was set up about five decades ago in the US, later expanding to Europe and Asia. The firm has had an office in Dubai since 2009 and started deploying capital into the region more recently, though executives are looking to dial up their presence.
“Once we decide that we want to go into a region, we operate more like a switch than a dimmer,” co-Chief Executive Officer Scott Nuttall told Bloomberg News in Riyadh on the sidelines of the Future Investment Initiative. “We want to invest more capital in and with partners that are here,” he said in an exclusive interview alongside two of KKR’s most senior regional executives.
The firm recently reported its second-highest fundraising quarter, a period where investment activity also rose sharply. Over the past year, it has deployed about $85 billion globally across asset classes. The Middle East accounts for a small proportion, but Nuttall pledged to scale up, “much like we’ve done in Europe and Asia.”
Buyout firms have been drawn to newly-ascendant Gulf economies that are trying to diversify from oil into areas like finance and artificial intelligence. Massive privatization programs are also seen as a lucrative opportunity.
But it’s also a delicate moment for alternative managers in the region. Many of the largest Gulf wealth funds — historically significant backers of the industry — have become pickier about who they work with. Some have sounded alarm over valuation practices and returns, while others say pockets of the market have become crowded.
KKR, for its part, has picked up the pace of dealmaking in the Gulf, which Nuttall said delivered “emerging markets growth for developed market risk.” It has invested about $2 billion over the past ten months, buying a slice of Abu Dhabi National Oil Co.’s gas pipeline network and a stake in one of the largest Gulf data center firms.
A Wide Lens
Other titans of global finance, too, have rushed in.
Brookfield Asset Management is now one of the biggest foreign investors in the Gulf, BlackRock Inc. recently signaled ambitions to significantly boost regional investments, while the likes of CVC Capital Partners Plc and General Atlantic have ramped up dealmaking. Executives from many of these firms will head to Abu Dhabi this month for the city’s annual finance confab.
KKR executives brushed aside concerns over competition, and said their ability to do a broader variety of deals offers an edge. The firm invests from a global pool of capital, allowing it to target bigger opportunities, according to Julian Barratt-Due, head of Middle East investing.
“Our mandate is very broad and flexible with respect to duration and cost of capital as well as size, governance structures, holding periods,” he said in the interview. “That gives us a really wide lens when it comes to deployment and it widens the addressable opportunity set.”
“Being able to play across that whole range helps,” he said.
KKR opened its first regional office in Dubai 16 years ago, followed by Riyadh in 2014. Co-founders including Henry Kravis have flown into Gulf cities for over three decades to raise capital and build partnerships with sovereign wealth funds. Nuttall himself is a frequent visitor, while former US General David Petraeus — chairman of the Middle East franchise since April — is a fixture at regional finance forums.
In all, it currently has 20 employees in the region, and recently set up an investment team led by Barratt-Due. “This isn’t a new endeavor,” Nuttall said. “I’d say what is a bit younger is the idea of investing capital in the region, not just taking capital from the region.”
That appetite for dealmaking has triggered a regional revival for the industry following the collapse of Abraaj Group, but it’s also ratcheting up competition for assets and a slice of the region’s billions. Even a flare up in the regional conflict over the summer and fluctuations in the price of crude haven’t deterred firms from continuing to set up local outposts and adding investment professionals.
“The Middle East is the world’s worst-kept secret,” said George Traub, managing partner at Dubai-based boutique Lumina Capital Advisers. “The likes of Brookfield have had an early mover advantage by getting access to a string of deals and others have taken note,” he said, adding that firms who may have been underweight are now recalibrating their approach.
Recent transactions have centered on sectors tied to the region’s growth. Brookfield invested in a Dubai-based education provider last year, while Permira and Blackstone Inc. poured money into a property classifieds website recently, in a bet that an influx of expatriates would continue to boost those sectors.
“From an investment standpoint, it’s a pretty interesting area, and there are a lot of things that rhyme with what we see in Asia,” Nuttall said. “And we’re the largest manager in Asia.”
Opening Up
Buyout shops started to change their approach to the region a few years ago when Gulf states decided to open up some of the marquee infrastructure to international investors. KKR and BlackRock were involved in the first such deal in the Middle East, when they bought into Adnoc’s oil pipeline network in 2019.
“Every country has ambitious economic transformation plans and are seeking foreign investments,” General Petraeus said in the interview. “The thinking is why hold all these assets on your balance sheet when an investment firm can come and buy some of it.”
Such transactions continue to present opportunities for buyout firms. Earlier this year, Saudi Aramco signed an $11 billion lease transaction with a group led by BlackRock’s Global Infrastructure Partners for assets linked to the Jafurah gas project.
Aramco is now considering plans to raise billions by selling assets including its oil export and storage terminals business. The action has spread further afield to places like Kuwait, where the state oil firm is considering leasing part of its pipeline network to help fund a $65 billion investment plan.
But the region can still be hard to crack for alternative asset managers. Auction processes can be less structured than in the West, businesses are sometimes more reluctant to cede control, and capital markets are relatively illiquid.
KKR executives are looking to lean on their local presence to counter some of those challenges. A significant portion of its deal pipeline comes from having conversations with local entities, Barratt-Due said.
“You need to be on the ground,” he said. “This is impossible to do if you’re sitting in London or New York, you just need to meet with people.”
Most Gulf markets gain on oil, US Fed rate cut hopes | Reuters
Most Gulf markets gain on oil, US Fed rate cut hopes | Reuters
Most Gulf stock markets closed higher on Thursday, buoyed by rising oil prices and growing expectations ahead of next week's U.S. Federal Reserve meeting, with investors awaiting key economic data for clearer insight into the Fed's future interest rate decisions.
Oil prices were steady on Thursday, with the market focused on Ukraine's attacks on Russian oil assets, while stalled peace talks tempered expectations of a deal restoring Russian oil flows.
Saudi Arabia's benchmark index (.TASI), opens new tab gained 0.5%, with Saudi National Bank (1180.SE), opens new tab, the country's biggest lender by assets, rising 1.6% and telecoms firm Etihad Etisalat Co (7020.SE), opens new tab finishing 2.9% higher.
Elsewhere, oil giant Saudi Aramco (2222.SE), opens new tab was up 0.3%.
The kingdom's non-oil private sector business activity expanded at its fastest rate in 10 months in November, driven by robust demand and increased hiring, although new order growth slowed from the previous month, a survey showed on Wednesday.
Dubai's main share index (.DFMGI), opens new tab rose 0.4%, led by a 3.6% jump in top lender Emirates NBD (ENBD.DU), opens new tab and a 0.7% increase in blue-chip developer Emaar Properties (EMAR.DU), opens new tab.
In Abu Dhabi, the index (.FTFADGI), opens new tab added 0.4%.
U.S. private payrolls fell by 32,000 in November, the steepest decline in more than two-and-a-half years, Wednesday's ADP report showed. However, still-low layoff levels indicate this weakness might not accurately represent the labour market's underlying strength.
Traders now see an 89% probability of an interest rate cut next week, based on the CME FedWatch tool, and major brokerages likewise anticipate easing at the December 9–10 meeting.
Monetary policy shifts in the U.S. have a significant impact on Gulf markets, where most currencies are pegged to the dollar.
The Qatari index (.QSI), opens new tab eased 0.1%, with Qatar Islamic Bank (QISB.QA), opens new tab losing 1%.
Outside the Gulf, Egypt's blue-chip index (.EGX30), opens new tab closed 0.4% higher.
Most Gulf stock markets closed higher on Thursday, buoyed by rising oil prices and growing expectations ahead of next week's U.S. Federal Reserve meeting, with investors awaiting key economic data for clearer insight into the Fed's future interest rate decisions.
Oil prices were steady on Thursday, with the market focused on Ukraine's attacks on Russian oil assets, while stalled peace talks tempered expectations of a deal restoring Russian oil flows.
Saudi Arabia's benchmark index (.TASI), opens new tab gained 0.5%, with Saudi National Bank (1180.SE), opens new tab, the country's biggest lender by assets, rising 1.6% and telecoms firm Etihad Etisalat Co (7020.SE), opens new tab finishing 2.9% higher.
Elsewhere, oil giant Saudi Aramco (2222.SE), opens new tab was up 0.3%.
The kingdom's non-oil private sector business activity expanded at its fastest rate in 10 months in November, driven by robust demand and increased hiring, although new order growth slowed from the previous month, a survey showed on Wednesday.
Dubai's main share index (.DFMGI), opens new tab rose 0.4%, led by a 3.6% jump in top lender Emirates NBD (ENBD.DU), opens new tab and a 0.7% increase in blue-chip developer Emaar Properties (EMAR.DU), opens new tab.
In Abu Dhabi, the index (.FTFADGI), opens new tab added 0.4%.
U.S. private payrolls fell by 32,000 in November, the steepest decline in more than two-and-a-half years, Wednesday's ADP report showed. However, still-low layoff levels indicate this weakness might not accurately represent the labour market's underlying strength.
Traders now see an 89% probability of an interest rate cut next week, based on the CME FedWatch tool, and major brokerages likewise anticipate easing at the December 9–10 meeting.
Monetary policy shifts in the U.S. have a significant impact on Gulf markets, where most currencies are pegged to the dollar.
The Qatari index (.QSI), opens new tab eased 0.1%, with Qatar Islamic Bank (QISB.QA), opens new tab losing 1%.
Outside the Gulf, Egypt's blue-chip index (.EGX30), opens new tab closed 0.4% higher.
How #AbuDhabi’s economy came to be dominated by IHC
How Abu Dhabi’s economy came to be dominated by IHC
From electricity, property development and hospitals to billboards, driving schools and chicken farms, one vast conglomerate lies behind much of Abu Dhabi’s domestic corporate landscape: International Holding Company.
From electricity, property development and hospitals to billboards, driving schools and chicken farms, one vast conglomerate lies behind much of Abu Dhabi’s domestic corporate landscape: International Holding Company.
IHC has grown rapidly in recent years and now boasts roughly 1,500 subsidiaries, according to chief executive Syed Basar Shueb, with interests — and influence — across the emirate’s rapidly growing economy.
“We are looking to consolidate sector by sector,” Shueb told the Financial Times.
IHC’s assets stand at more than $125bn — a figure the group, chaired by deputy ruler Sheikh Tahnoon bin Zayed al-Nahyan, wants to almost double over the next five years and a far cry from just seven years ago when it was a virtually unknown entity invested in fish farming and real estate.
However, experts in the Gulf’s political economy say the rapid rise of IHC reflects a blurring of lines in the emirate between royal and state assets, as well as a lack of transparency.
The concentration of economic heft in the hands of royalty makes the emirate “an interesting hybrid of hyper-modern and completely patrimonial”, said Steffen Hertog, an associate professor at the London School of Economics.
Karen Young, a senior fellow at Washington-based think-tank the Middle East Institute, said IHC’s grip on Abu Dhabi’s economy could lead to some “crowding out” of the private sector. The group’s subsidiaries own a bevy of local entities, including hotels and a vegetable oil producer.
IHC told the FT in October it planned to double its then $119bn asset base — its total as of the end of June — over the next five years. By the time it reported its third-quarter results in November, the figure had hit $126bn.
However, bankers privately express doubt about the valuations of its holdings, many of which were originally transferred for free from parent company Royal Group, also Sheikh Tahnoon’s company. There is no independent bank research on IHC, nor is it rated by any credit agencies.
“The ruling family in Abu Dhabi, bloated off the back of decades in oil rents, had all these bits and pieces in the private sector but they weren’t really joined up,” said Christopher Davidson, an academic writing a book on IHC. “A national champion was needed to streamline this into something more coherent and aligned with diversification objectives.”
While IHC has helped rationalise various royal holdings, Davidson added, its “market concentration is off-putting to many outside investors” who might otherwise consider stakes in Abu Dhabi’s companies.
IHC’s $240bn market capitalisation makes it by far the biggest constituent of the Abu Dhabi stock exchange, taking up 41.5 per cent of the FTSE ADX General Index — a figure that rises still further when listed subsidiaries such as Alpha Dhabi and 2PointZero are included. First Abu Dhabi Bank, the country’s largest lender and runner-up at a 10 per cent weighting, is also chaired by Sheikh Tahnoon.
Because IHC is ultimately controlled by Sheikh Tahnoon, who is also the UAE’s national security adviser and chairs two of Abu Dhabi’s sovereign wealth funds, academics classify it as a “state-related entity”. Its spread across the economy comes despite an economic master-plan drawn up by the oil-rich emirate in 2008 in which the first of nine pillars for success was a “large, empowered private sector”.
As economic activity unrelated to the oil industry has grown, now accounting for more than half the emirate’s GDP, one of the world’s richest cities by sovereign wealth has become a magnet for hedge funds, asset managers and millionaires setting up family offices at its offshore financial centre.
However, scholars and business people say domestic economic development is driven by companies controlled by the same royals who run the emirate or by those owned by sovereign investors such as ADQ, chaired by Sheikh Tahnoon, and Mubadala. Some private company executives complain the game is rigged against them.
One UAE-based executive described Abu Dhabi as “a very modern monarchy that really behaves like a conglomerate — someone handles finance and investment, another handles tech”. For the emirate, they said, “a company is a means rather than an end”.
Unlike neighbouring Dubai, which has modest oil reserves and a thriving private sector, Abu Dhabi’s crude-based wealth blunted the need for economic diversification, with its ruling family “way more present in the economic system”, the executive added.
One senior executive at an Emirati company said the situation was also the result of complacency among traditional business families in Abu Dhabi, which were “in their comfort zone for a long time . . . They didn’t want to take a risk of doing things differently”. Nevertheless, he said, “it’s not right you run the economy yourself 100 per cent — any private sector cannot compete”.
Today Abu Dhabi is further reducing its reliance on oil exports, with strong non-oil growth in recent years and investment in emerging technologies such as artificial intelligence. In the first half of the year, Abu Dhabi’s non-oil sectors collectively grew 6.4 per cent against the same period in 2024, according to official statistics.
But even as it pursues diversification, Abu Dhabi’s commitment to an independent private sector has waned, according to Kristian Coates Ulrichsen, Middle East fellow at Rice University’s Baker Institute in Texas.
Grand plans in the Gulf states “can be overtaken by new developments in emerging sectors”, he said, citing AI as an example. These “provide opportunities for state-linked entities to move rapidly and become market leaders, able to mobilise capital and leverage networks that crowd out private sector involvement.”
Another Sheikh Tahnoon-controlled group, G42, has taken the lead on AI, a technology Abu Dhabi has helped finance in an effort to position itself as a regional hub. An IHC subsidiary, Emircom, is a big contractor to data centres.
Some businesspeople cite healthcare as an example of how sovereign and royal-connected investors dominate whole sectors. PureHealth, the UAE’s biggest healthcare network, is largely owned by sovereign investor ADQ and IHC subsidiary Alpha Dhabi. Another major provider, Burjeel, is partly owned by IHC. Meanwhile, M42, a company co-owned by sovereign investor Mubadala and G42, owns Abu Dhabi’s Cleveland Clinic hospital.
Although Abu Dhabi’s sovereign wealth funds buy into private companies around the world, their home market is characterised by what bankers call “left pocket-right pocket” transactions — deals between sovereign investors and state-connected, royal-controlled entities. For example, IHC recently sold its entire 42.5 per cent stake in developer Modon Holding to government-owned L’imad Holding Company.
Opportunities do exist for international private sector companies to partner with state or royal-connected corporations. Microsoft is working closely with G42, having bought a minority stake in the company last year. BlackRock is partnering with IHC on a new reinsurance business.
IHC’s soaring asset base was partly down to companies in its stable growing, Shueb said, although he added that it planned to spend $36bn every 18 months making new acquisitions. It is among big global groups considering a bid for overseas assets owned by Lukoil after the Russian group was hit with new US sanctions.
Regarding criticism that his group could be crowding out the UAE’s private sector, he noted that “54 per cent of our revenue comes from outside the country”, with recent acquisitions set to push that figure closer to 65 per cent.
“We’re all striving for an international business,” he said. “Locally, whatever we can capture, we have captured those things.”
And he insisted IHC did not get special treatment because of its royal connections.
“There is zero preference given to us in any public tender,” Shueb said, adding that the market was “open for everyone”.
#AbuDhabi sovereign fund accuses US private equity firm of self-dealing in lawsuit
Abu Dhabi sovereign fund accuses US private equity firm of self-dealing in lawsuit
One of the world’s largest sovereign wealth funds is suing a US private equity firm, accusing it of attempting to short-change investors on the sale of a portfolio company to another one of its funds.
One of the world’s largest sovereign wealth funds is suing a US private equity firm, accusing it of attempting to short-change investors on the sale of a portfolio company to another one of its funds.
The Abu Dhabi Investment Council is seeking to block Energy & Minerals Group from selling its stake in Ascent Resources, one of America’s largest private gas drillers, to one of the private equity firm’s sister funds. The sovereign fund alleges the deal undervalues Ascent while generating a windfall for the new fund managed by EMG.
The wealth fund said in a court filing unsealed on Wednesday: “Defendants are trying to force a conflicted sale of EMG fund assets to a continuation vehicle to reap a massive benefit for themselves at the expense of ADIC and the other investors to whom defendants owe fiduciary duties.”
The dispute sheds new light on the potential conflicts of interest that arise as private equity firms increasingly exit ageing deals by selling companies between funds they manage instead of taking them public or finding outside buyers such as large corporations or other buyout groups.
Such transactions, known as continuation fund deals, have grown in popularity in recent years as private equity groups have struggled to find buyers for trillions of dollars in unsold assets. Continuation deals amounted to a record 19 per cent of all PE asset sales in the first half of 2025, the Financial Times previously reported. But they are viewed warily by investors, given that buyout groups arrange the deals and are on both sides of the transactions.
An investor in Ascent Resources told the FT they believed the gas driller was worth more than $7bn when including debt. But EMG’s continuation fund plans to buy its over 30 per cent stake in Ascent at roughly a $5.5bn valuation, leaving investors with lower proceeds than what they believe they could get from an initial public offering or a sale to a third party. EMG is also asking to pay its investors over a two-year time period, further lowering the present value of the proceeds, they said.
However, other private equity groups that specialise in energy passed on the deal based on the belief that Ascent was overvalued, other people briefed on the matter said.
EMG, a $12bn Texas-based group founded by John Raymond, the son of former ExxonMobil chief executive Lee Raymond, first invested in Ascent in 2014 when the company, founded by the late shale gas-drilling baron Aubrey McClendon, was called American Energy Partners. It is one of the leading gas drillers in the US with vast resources in Ohio’s Utica shale. In the ensuing decade, many energy-focused private equity groups were stung by deep downturns in the industry. They have since earned lacklustre returns and struggled to raise new money from investors.
EMG’s four most recent funds all have earned net returns of 10 per cent or less, according to public pension documents filed by the Minnesota State Board of Investment. While the group has not announced a new private equity fundraise since 2019, it completed a $1.1bn continuation fund earlier this year for midstream assets it held in decade-old funds.
A continuation fund deal would increase EMG’s ownership in Ascent and restart its ability to earn management fees and potentially lucrative performance fees if the driller’s value rises in the coming years.
The sovereign wealth fund said in its complaint it believed the deal incentivised EMG “to buy out its current investors, including ADIC, at as low a price as possible”.
It also said the PE firm stood to “earn no or minimal carried interest on the asset if an exit to a third-party buyer were to happen now”.
In addition to arguing EMG’s deal might short-change some investors, the sovereign fund criticised the speed at which the private equity group broached the continuation fund deal with its investors and tactics to win their consent which it called “underhanded” and “misleading”, the filing said.
ADIC alleged the PE group coerced investors to support its continuation fund deal by providing them with substantially lower valuations for Ascent than they did to prospective new buyers.
ADIC also claimed EMG concealed alternatives to the fund-to-fund deal, such as internal IPO plans and interest from third-party buyers. It is now asking EMG to launch a formal sale process for Ascent.
The sovereign fund is a part of Abu Dhabi’s broader state-backed investment group Mubadala, which manages more than $300bn in assets and is one of the largest investors in the world.
The sovereign fund said it could not comment on open litigation. EMG and its founder John Raymond did not respond to messages seeking comment.
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