A Masterclass in Infrastructure Investment

Good morning and welcome to ADFW to the infrastructure summit. Uh we're joined here today by some um really integral players in the infrastructure space

just went

in the Abu Dhabi and globally. Um, I'd like to kick off uh this panel by uh covering some of the groups that we're speaking with to understand them a little bit more. And I'll start with Salud. Uh what what is ADIC? You work for the Abu Dhabi Investment Council.

Can you talk about um how does ADIC fit into Mabudler since since the integration and uh what differentiates you from other sovereign wealth funds? Uh thank you uh Lisha and um great to be here today. Uh it's a pleasure to be here among some uh really great leaders of the finance world uh here at Abu Dhabi Finance Week.

Um

so on Abu Dhabi Investment Council

this is this session

uh we are uh a leading sovereign wealth fund based here in Abu Dhabi that was established back in uh 2007. Um we are a unit of the Mubadala investment company. Um we uh manage roughly 150 billion uh dollars of AUM. Um and uh that is in managed through what we call uh the endowment model of investing. Now um if you look at us through that lens, we're actually one of the largest endowments in the world.

Uh and if you compare us to the US university endowments, we are three times the size of the largest endowment in that space. Um in terms of how we deploy uh capital, uh we uh are always on the hunt for uh the best and brightest uh managers uh out there. So we deploy our capital through funds uh and co-investments uh and sometimes through bespoke vehicles alongside these two uh structures. Um we uh are also mostly focused on the private market. So 65% of ADEX portfolio actually sits in the private market.

Um in terms of how we fit into uh the Mubadada group um I'll answer that question in two ways. The first is uh we are looked upon as the indirect arm of the group. So again, funds, co-investments uh and SMAs uh alongside uh best-in-class uh managers whereas Mubada takes uh much more direct approach uh to investing. Uh the second point I wanted to make there is uh we present a great diversification engine uh to the Mubadella group. If you look through ADEX portfolio, not a single investment generally speaking represents more than uh 1% of the portfolio.

So we are a very very diversified uh portfolio of investments and that allows Moubadela to take on more uh uh more concentrated risk and take on more idiosyncratic risk because of the diversification we we provide. And in terms of the Abu Dhabi ecosystem, I think we fit very nicely uh into the Abu Dhabi ecosystem and every sovereign wealth fund has a role to play. Uh and I think we have a great role to play uh from that perspective.

Thanks Bob. And Rod turning to you and ADQ uh a newer sovereign wealth fund. Um could you tell us how ADQ fits into the Abu Dhabi's

broader ecosystem and globally as well?

So good morning everyone. Uh ADQ was originally set up in 2018 as a development company mandated to oversee and guide the development of previously state-owned assets mostly in the infrastructure sector, transport, energy, water, and waste management. Each serving a distinct purpose in the local economy by boosting productivity, by enhancing trade, and by strengthening resilience. Every business needs reliable modern infrastructure to operate, to grow and thrive. Infrastructure assets are the building blocks of a resilient local economy.

The transformation we drive within our companies benefits other industries. Our project, our portfolio management approach is focused on helping our companies drive transformational change and emerge as worldclass leaders that can compete on the world stage. ADQ today is an active sovereign investor focused on critical infrastructure and global supply chains. Its portfolio comprises seven different clusters, more than 25 portfolio companies, and an operational footprint spanning more than 130 countries. From 2019 to 2024, ADQ achieved an average annual profitability improvement rate of 25% across its portfolio of companies.

Last year, ADQ contributed 22% of Abu Dhabi's non-hydrocarbon GDP and 13% of its notional GDP.

Great. Thanks, Rod. And Dr. Waffa, you're um we've heard from the two sovereign wealth funds in infrastructure. You sit on the other side of the partnership fence.

Um we're going to delve into what I squared does a little bit later, but just at a high level, can you help us understand where you fit in into this ecosystem? First of all, thank you very much for having me on the panel. Uh, and it's really exciting to be here at the ADFW, which is really an opportunity for everyone to be able to mingle and understand a little bit what's happening in the global financial markets. Uh, and as we know, Abu Dhabi has become a key part of that global capital movements across the world. So, I squed Capital invests in infrastructure globally.

We currently manage uh over $60 billion uh across different sectors very much like what we just heard. Um we invest in energy, renewables, transport, logistics, uh digital infrastructure. Um I'd say in terms of distributions, uh 40% tends to be in the US uh and then in Europe and then in high growth economies whether it's in India, Latin America or Southeast Asia. uh and of course in the region here. So we we look to invest for the long term uh and we look to provide value ad in addition to what you would expect to get from infrastructure as an asset class.

Um so that's in a nutshell what we do.

Great. Thank you. So we've seen infrastructure emerge as an asset class quite significantly in the last 20 years. I think the rough stats are that u it's grown at sort of less than 2% of sovereign wealth fund portfolios to um now at least 8% of those portfolios which is sort of 4x in a in a short time frame. Um what are your perspectives and what have been your observations um from from where you sit in the council on this growth um and in your opinion has the allocations maxed or is there still more to allocate to s

yeah so um so maybe I'll u I'll take you back to infrastructure when uh when we first started started. So in 2007 when the council was uh first established um an infrastructure group was also established at the time and um for many many years they actually uh weren't able to deploy the budgets that were allocated to them. uh the infrastructure space wasn't uh fully uh developed uh in a sense. It was not very uh institutional um and uh they really struggled to to find the right talent uh and find the right opportunities to deploy the capital into. Fast forward to today uh the the infrastructure uh opportunity is an amazing opportunity.

there's a lot to do in the space. Uh the talent uh that exists uh is great talent, you know, uh exemplified here by Dr. Sada. Um and you're able to express your investments uh in many different ways up and down the risk spectrum and across geographies and themes. So um it has actually become a very core and central uh component of any uh institutional portfolio today.

Um and um in fact if you look at the council uh by way of example um our allocation to infrastructure uh has actually uh gone up uh year over year and uh is expected to go up again in 2026.

Yeah.

So it's it's really an important part of any institutional uh portfolio going forward.

Thank you. And Dr. Sardic, what's what's your view of this as you're looking at infrastructure investments globally? Um are you seeing areas where it's becoming crowded um and competitive or um is is there a number of opportunities that remain available that are attractive? Uh I I've been investing in that sector for a long time and the question of uh has it uh has is it being more competitive than ever and is it crowded is the same question I've been hearing for the last 30 years.

And so uh the short answer is it's it's competitive if you have a very narrow view in particular sectors but at the same time it's really cyclical. Uh so some sectors become quote unquote more competitive than others. Um but in the long run what I've seen over the last 30 years is truly an explosion in the demand for infrastructure for various reasons. Um historically uh o over um humanity of the last 1015,000 years most people have lived in rural areas. Uh you now have more people effectively living in urban areas than in uh rural areas and that requires an enormous amount of infrastructure that needs to be built.

uh you're looking at the development of a new equivalent to New York City practically every week globally for the coming 30 plus years. That's a staggering number. At the same time, broadly speaking, governments have not been able to deliver the kind of services that people have expect been expecting in the last 20 30 years when you compare it to let's say the 60s. And so the inability to deliver the kind of services people expect whether it's in education, health and other things means that the amount of capital available to deploy to all of these services including infrastructure is not readily available. And then you add on top of that the fact that you have budget deficits that have increased over the last couple of years, the last decade actually, to levels which makes it difficult for governments to be able to allocate capital in an efficient way, especially to long-term investments when they have immediate short-term expediencies.

That suggests that the sovereign funds, pension funds, private capital, whatever, have a role to play in the development of that infrastructure. Um so so that's one element. The second element is Southeast Asia and China and India have been effectively a major engine right of economic growth globally. 70 to 80% of the growth of the new growth that's going to come in the coming two decades is going to come from that region. And so there the needs for infrastructure are massive.

So there you see a lot of opportunities which was not necessarily the case a few decades ago. So what you're seeing is a an increase in demand for infrastructure uh not sufficient capital to be able to do all the kinds of things that you want and then add to it now the potential for AI infrastructure that needs to be developed which of course we reading every day in the newspapers uh about the fact that we need to spend hundreds of billions of dollars uh in the development of data centers fiber optic connectivity power generation to be able to feed all of that. So, so yeah, I I think the concern is not the concern is not the lack of opportunities or the competitiveness. Um, I think the concern is more the prioritization of infrastructure globally.

Great. And so I'd love to ask each of you actually what sectors and regions within within the space you're finding most attractive at the moment. So um I would say it's a it's a very tough question because um infrastructure today is really a global opportunity. Uh there are pockets of value in every geography as Sad just mentioned governments are constrained. Uh they aren't able to spend as much going forward on infrastructure uh as as much as it's needed.

uh so private capital will need to really step in and you know as s mentioned the the big uh themes whether it's uh the the digital world and you know the trillion opportunity uh in the data center world um you have energy transition um you have a supply chains u you know being uh reconfigured um and you know you have other other themes like the social infrastructure by way of example which will need a lot of spending uh to come in for each one of these themes is a huge opportunity set uh on its own. If you were to really push me, I'd say maybe the digital and the energy transition spaces are probably uh they probably edge the other ones by a small margin. Uh but all of these themes actually present amazing opportunities uh in the coming years for uh pro for private capital.

Do you guys have anything to add to that?

I I think SA is absolutely right. You you think of it this way. You have a six just to simplify like five six by3 matrix right uh could be energy could be renewables could be transport digital infrastructure AI infrastructure and so on and call it three regions just to simplify US Europe uh then you can add Middle East you can add Southeast Asia you can Australia and so on so you have a large matrix in that matrix you're going to get null sets so there are sectors within these regions you're not going to invest for whatever reason either because the regulation is not there or because as you were alluding earlier it's competitive and therefore that's not necessarily where you want to be. At the end of the day the key is this do you have a global capability to invest across all of these sectors in the different regions and I think that's the the condition precedent that you need to ask yourself. So if you're an ADQ or you're an addict, you're in a position to be able me excluded to attract the best talent so that you can decide based on your portfolio allocation where you see the opportunities.

So if you want to invest in I have no idea renewables in Australia then you say this is what I'm looking for or you want to invest in someone who has a global perspective this is what you you're looking for. So, so I think there is no I I agree completely. There is no particular sector that you can really talk about. If I look at the US for example, up until 9 months ago, the renewable sector was highly attractive. So overnight that sector becomes less attractive because of a change in administration and regulation that basically thinks rightly or wrongly that renewables is not a priority.

And if the government is to subsidize a sector, it should not be that one, but should be something else. And in fact, in fairness to the administration, they said, "We're not interested in this, but we're interested in these particular sectors related to onshoring of industry and manufacturing." So here you see a shift. And so literally yesterday you would have thought the renewable in the US given the size of the economy is extremely important less so today because of regulation but other sectors become more interesting. So you have to have that nimleness and flexibility to be able to allocate capital.

Mhm. And Rod um ADQ is in 25 countries sorry has 25 major companies in over 130 countries. Uh you've got an almost $300 billion portfolio. Um yeah, partnerships are a really critical element to what what you do and we've heard that just in the in the

last two answers. Um can you talk about um sort of how ADQ approaches partnerships?

Sure. Sure. Partnerships are essential to ADQ. Um I think what we're looking at at the moment is infrastructure today requires scale, technical depth, and long-term capital. No single institution can deliver on that alone.

ADQ partnerships allow us to combine our sovereign capability with specialist operators so the essential infrastructure can be developed more efficiently and with greater impact. Partnerships give us speed, flexibility, and the ability to scale our projects that would difficult to do alone. They allow us to match our long-term capital with partners that bring deep operational and technical expertise. Examples being ECL which is a a$2 billion US energy platform focusing on new build power in the US market. AFC bringing its renowned governance and values to the emerging markets to Plener who's an Australian-based developer with expertise in public private partnerships and to Orion which is a US-based fund focusing on the mining sector who we formed a joint venture with to execute investments in mine financing.

Partnership platforms create shared accountability and discipline governance which are essential in our complex core markets of energy and utilities, transport, logistics and data transformation.

Great. Thanks. And then uh looking at the council and I squared partnership, it's um it's an LPGP partnership that I think many would envy and and love to emulate themselves, particularly probably groups in the room. Um it would be great to hear from your perspective s what makes the council a valued partner and what the council values in in GP partnerships and then I'll I'll turn to you Dr. leave the room now or

pardon

should I leave the room?

So um as we were preparing for this panel um you know Sadav jumped on the call when we were talking about uh the the partnership and one thing I said on the call was um we were one of the very first backers of uh of I squared when Sada Gotham and the team came out of Morgan Standby. He actually very quickly jumped in and said, "No, you guys were actually the very first backer of I squared uh when we came out of uh of Morgan Stanley. Now, this is a partnership that we we cherish very much. Um we uh have gone from strength uh to strength uh together. Um it's a partnership that uh is built on common values, on trust uh and of course in the investment world uh performance has has been able to deliver.

Um but what you get from us as a partner is um we're we're we see as a true extension of our team. Um we uh we don't have offices outside of Abu Dhabi. So the managers that we we partner with they are really uh our arms uh and legs uh in the geographies that they uh represent our capital in. So um so we see them as true extensions of our team. We give them very honest uh and timely feedback uh when when that is needed uh or when we feel there is something that we can do together uh that they may not be seeing.

Um and most of all uh what we tell SAD is as long as you keep delivering uh on performance and on all of the other metrics that uh that we we see from him as a fiduciary we will continue to be there as uh as a partner uh that will continue to deliver on our promise to keep backing him over time.

Great. And Dr. Sardc um could you take us through a little bit how that relationship deolved from your side and including I guess any advice you might have for for others wanting to walk the same path as you potentially

I I think the advice is really the same which is u the performance is the single most important thing you can deliver uh because at the end of the day that's what you're measured on and I think the second element which is I'd say almost equally important is transparency. Investors like to understand and like to be told what's going on both the good news and the bad news. Uh I think that's an extremely important element so that you're able to explain quickly in a transparent fashion um the good news but also the bad news. Now, I squared happens to have had uh no losses uh since its inception. It doesn't mean it's not going to happen in the future, but the point is to be able to constantly and consistently provide information on what's going on both as a GP and as an investor.

That I think is the single most important thing you can do. When you combine the two, I think there is something which is extremely important which I think um people from the region here would understand which is really loyalty. You need to be able to provide uh that relationship where people can trust you and know uh as we say know where to find you when something goes wrong. And I think that's extremely important.

Good words of advice. and looking more uh closer to home here at the Middle East. Um I've been here 18 years in Abu Dhabi and it's never been a more exciting time both in Abu Dhabi and regionally and I understand uh Dr. Sard that that you guys are now um looking to invest in the Middle East. uh could you talk a little bit about the opportunities that you're seeing locally and uh we'd be really interested to understand as well what global LPs the shift in their appetite for investing in the region as well what your observations are in that regard

so I think there's two questions here the first let me address the second one which is the LP's appetite to invest in the region uh I think that is slow um when you talk about LPs. We broadly talking about institution investors that are looking to invest in the region and I think it's relatively slow because the opportunities relatively speaking are not there understandably right because you have capital in the region that has traditionally invested in the region at a cost of capital which is what you would expect for uh uh let's say the Middle East or the GCC. uh that of course is changing and as opportunities grow, as the role of the private sector continues to grow relative to the public sector, you're going to get more and more opportunities to invest. And I'm not talking here really around infrastructure for now. On a broader level, I think the region has been extremely exciting over the last uh 5 10 years.

uh and there's been certainly a fundamental change in the way the Saudi economy has been effectively managing itself and that is creating a massive uh um pull into the region which benefits everyone. So I think that's an extremely important uh element from our perspective. I look at the opportunities in the region in two respects. Number one, not a question of government not having sufficient capital because the government over a longer term has the ability to allocate capital as opposed to say industrial economies that have a genuine issue. I I think there is a desire on the part of the government to be able to deregulate and encourage both domestic capital and international capital to come in and turbocharge the economy especially new areas whether it's AI or biotech uh or technology broadly speaking I think what's extraordinarily uh important to remember is when you look at the human development statistics of the 1990s in the region the illiteracy rate or literacy rate on average for the population was around 70%.

And in 1991 92 there was a very important influential report issued by the World Bank on what the Middle East needs to do over the coming two decades. um you look at the same statistics today in terms of literacy rates that number is close to 99%. That's an extraordinary achievement. So when someone tells me where are the sectors you want to invest in I would tell you in that sense except for the details of course I'm agnostic but what excites me the most is the extraordinary jump in human capital

that the best the the most attractive part in the Middle East and people are not recognizing it yet is not the capital is not that you have huge sovereign funds. It's actually the talent that you have in the region. An extraordinary pool of talent which in the last 20 30 years in my view competes with any other talent uh across any other region

and that's what excites me the most.

Thank you. And what about Rod from ADQ's perspective? Um do you have a balanced uh local versus international approach to um the allocations or where are you seeing?

Our background is really one of we have uh national assets that in the utilities, transport um logistics and we utilize them as best as possible. So our focus to date has been very much on making sure those businesses are are growing are pro productive and going forward. So the there's a transformation now that we're starting what was previously been opportunistic in terms of international viewing is now becoming more mainstream. So we're looking internationally a lot more. Um it will be gradual.

It will be slowly. It'll be very measured. So we're we're taking the talent and skill that our companies have and with the the four things that ADQ brings to the table, you know, we are very fortunate to have capital and we're very appreciative of that. Secondly, uh we do deals for the long term. We're not a short-term player.

Thirdly, we will do green field, which is rather unique for a sovereign.

Yes.

Uh and fourthly, where our one of our greatest assets is is uh really the GGG relationships that we have. We're very fortunate to have a chief executive who's also minister investments. That comes to its downside when he goes to visit because there's a lot of work we have to do after those visits. But it it gives us an opportunity to utilize our own assets on the international stage. So it gives a very comfort a great deal of comfort to other governments that were reaching out and and asking for our help where we can actually not only provide an investment.

We're there for the long term but more importantly we can utilize our assets as we go forward.

Yeah, I'm sure that will just get busier. There's 14 seers that the UAE has signed and um and that's increasing. So no doubt you'll have more and more coming your way. Um sad private credit is you know increasingly uh a focus. Um however isn't new.

Um what what do you see in the infrastructure and real asset space in terms of the interest in private credit in infrastructure?

Yeah. So uh again just going back to the opportunity set infrastructure is going to need a lot of capital going forward in all of the different verticals that I mentioned earlier. Um and you'll be able you you'll need to be in every form of capital uh that uh that infrastructure presents. Uh private credit today is an attractive proposition. Uh we have some exposure in our portfolio.

We've been exploring something with SAD as well. Um we have a credit team at the council who is a generalist credit team that that also uh looks at the opportunity set whether it's infra assets, private equity, etc. Um but generally speaking, we have exposure and we're looking to do more in the space.

Great. Thanks. Um we all saw Abu Dhabi on the world stage this weekend. uh for F1 it's been I think 16 years it's been running uh worldclass event worldass facilities um you can't do that um without having worldclass global scale infrastructure s were you able to enjoy any of it

yes so uh I did attend uh and I enjoyed both uh both the race and uh and the company that was around me at the time um but as you said just bringing it back to infrastructure. The infrastructure uh is just amazing around that that area. Um and it's it's uh it tells the Abu Dhabi story really over the last uh decade or so. Uh the entertainment uh infrastructure uh is world class, cultural infrastructure is world class, transport is world class, we have great education, great healthc care um and um you know if you if you think about it that is why the momentum has been very strong. Uh that is why talent wants to be here.

uh and we're proud to have uh to have been uh a part of a small part of that story uh as as ade.

Thank you. That's it for the panel. Thank you very much, gentlemen. I learned a lot listening to you today. Thank you.