Mubadala Development Company, which was established only eight years ago, has grown exponentially in a very short period of time and today has over $33 billion of assets across 19 countries and 110 investee companies. Such growth has meant the company has been faced with a number of challenges – not least the lack of a comprehensive risk management strategy to support the group’s increasing breadth and depth.
Photo of Fatema Al Sayegh, Alastair Fiddes and Faisal Falaknaz accepting on behalf of the Treasury Team at Mubadala.
Treasury Team
Mubadala is a catalyst for the economic diversification of Abu Dhabi. Established and owned by the Government, Mubadala’s strategy is built on the management of long-term, capital-intensive investments that deliver strong financial returns and tangible social benefits for the Emirate.
Mubadala brings together and manages a multi-billion dollar portfolio of local, regional, and international investments. The company partners with leading global organisations to operate businesses across a wide range of industry sectors including aerospace, energy and industry, healthcare, infrastructure and real estate. By doing so, Mubadala accomplishes its mission to contribute to the growth and diversification of Abu Dhabi’s economy.
In less than 18 months, an entire infrastructure has been developed and the financial risk team has grown from three to eight people in order to deliver on an ever-increasing and complicated mandate. A large part of the team’s energies have been dedicated to acting as an advisory service and hedge coordinator to the company’s various business units and investee companies, in order to address the limited sophistication, knowledge and understanding with regard to risk management and hedging policies.
The most tangible benefit has been to provide risk management discipline, process and procedures to a business which has risk exposures across multiple asset classes. The implementation of such a framework has also brought numerous intangible benefits, centred on four key pillars:
- People.
- Relationships.
- Processes.
- Governance.
The team has implemented four core treasury and risk management systems in the last 12 months – including Numerix, Quantum, QRisk and Bloomberg – which provides them with efficient in-house pricing capabilities and the ability to execute large derivative transactions, effectively acting as an in-house bank. The team has also implemented a version of the Merton model to effectively measure counterparty credit risk.”
“This Award is validation of the approach we have taken in risk management and the amount we have achieved in a relatively short period of time.”
In terms of innovation, the executed deals bear testament to the work achieved by the team.
These include:
- A pre-issuance interest rate swap on their GMTN programme: $750m.
- Replaced bank as hedge coordinator for Shams (solar power project): $600m.
- Interest rate swap for GMTN issuance, in order to asset liability manage funding for MGEC: $500m.
- Masdar internal FX hedging: €350m ($500m equivalent).
- Investing in physical gold to hedge portfolio tail risk: $200m.
- AFLAC private placement 20 year cross currency swap: JPY15 billion ($180m equivalent) – separated Yen private placement into debt and hedge; transacted each with separate counterparties.
- MGEC USD/CAD cross currency swap: $100m.
- Acted as hedge coordinator for a local utilities company.
- First corporate in the Middle East to issue euro denominated commercial paper.
“Mubadala’s financial risk management team has another busy 12 months ahead, which includes embedding the new team and systems and incorporating the financial risk activities and exposures of a $12.5 billion semiconductor business and a significant proportion of Abu Dhabi’s largest real estate developer, but we believe we have the necessary building blocks for another successful year,” as Alastair Fiddes, Head of Financial Risk Management concludes.
