Abu Dhabi wealth fund bucks the trend to bet on Turkey

The lira was in freefall and warnings of a deepening crisis in Turkey were growing when ADQ, an Abu Dhabi state investment vehicle, did what few other foreign investors have been willing to do: it pledged to pump billions into local businesses.

Now the fund is on the hunt for investments, from financial institutions to logistics and food, despite the economic turmoil. Mohammed Hassan al-Suwaidi, chief executive of ADQ, told the Financial Times that the lira’s weakness could provide opportunities, saying it was a “great time” to buy if you take “a long-term view”.

He added that the fund was already in “discussions with the Turkish sovereign fund [TWF] on a couple of opportunities,” including companies within TWF’s portfolio.

“They have some stranded assets that they can either bring you into, or you could develop a platform from, so we are looking at a few things with them,” Suwaidi said.

ADQ’s $10bn commitment underscores the rise of a fund that has rapidly become one of Abu Dhabi’s most active strategic investors since it was set up in 2018.

It came during a rare visit to Turkey in November by Sheikh Mohammed bin Zayed al-Nahyan, Abu Dhabi’s crown prince and de facto leader of the United Arab Emirates. It is being seen as part of attempts to repair fraught relations between the UAE and Turkey, as the oil-rich Gulf state switches from a decade of assertive foreign policy to what Emirati officials describe as economic diplomacy.

Turkey is currently grappling with huge falls in its currency — the lira lost about 45 per cent of its value last year — and soaring inflation, a crisis blamed on president Recep Tayyip Erdogan’s unorthodox monetary policy, particularly his insistence on cutting interest rates despite high inflation.

Suwaidi said that the country was an attractive investment prospect nonetheless.

“What I love about Turkey is a delivery will make its way to Germany in 12 hours in terms of location, [and] it has 84m people,” he said. “It’s a big powerhouse for industries; [has] great logistics capabilities, so we are definitely interested in logistics; great food businesses there, so definitely interested in that.”

He added that the fund was also “very interested” in Turkish financial services.

Last year, ADQ invested in Turkish start-ups Getir, a grocery delivery company, and Trendyol, the country’s largest ecommerce firm.

During Sheikh Mohammed’s visit, ADQ signed a memorandum of understanding with TWF, which has holdings in 28 companies, including state-controlled banks, mining, transport and energy companies.

Suwaidi said the prime focus of the fund, which he likens to Tamasek, Singapore’s state fund, is developing regional champions in industries ranging from waste-management to agribusiness and pharma. But he insists it has a “commercially driven development mandate”.

In the three years since it was established, ADQ has been on a spending spree that has included taking a 45 per cent stake in French commodities group Louis Dreyfus, buying Swiss pharmaceutical group Acino, plus local and regional businesses, and setting up venture funds, one of which invested in an Israeli lab-grown meat business.

Global SWF, a data tracking platform, estimates it has invested about $16bn over the past two years.

“They are very active, probably the most active by the number of deals,” said a senior Gulf-based banker. “They are in a hurry.”

ADQ began life as a holding company for Abu Dhabi state entities including utilities, Etihad, the national carrier, ports and its nuclear company. It is now estimated to manage assets of $110bn-$120bn and is chaired by Sheikh Tahnoon bin Zayed al-Nahyan, the UAE’s national security adviser, who is Sheikh Mohammed’s brother and oversees an expanding business empire.

The fund has four priority sectors, according to Suwaidi: healthcare and life sciences; food and agriculture; logistics; and utilities. It is a profile that fits Abu Dhabi’s national strategic interests as the emirate aims to develop industries in areas such as technology and life sciences, and boost food security for the import-dependent desert nation.

It announced this month that it was creating the UAE’s largest health provider by merging several state-affiliated entities into Pure Health, a company that had been owned by a listed conglomerate also chaired by Sheikh Tahnoon. ADQ will become the largest shareholder in Pure Health, a sign of the fund’s growing prominence in the state-dominated economy.

The main difference between ADQ and other Abu Dhabi funds, notably the $230bn investment vehicle Mubadala, is that its focus is primarily in the Middle East, Europe and Africa, Suwaidi said.

“I believe we should always be in a five-hour flight zone . . . [as] we are trying to evolve our champions, these markets are closer to us,” he said. “It’s much more effective to spend time developing that position as opposed to taking your waste management company to the US and trying to work your way back.”

The risk is a blurring of the various funds’ mandates and “jostling” between them, the Gulf banker said. In 2016, Abu Dhabi merged the International Petroleum Investment Company into Mubadala as part of efforts to consolidate its numerous vehicles, after the former became embroiled in the 1MDB Malaysian corruption scandal.

“There’s a bit of jostling at the moment, but I’m assuming it will calm down at some point,” the banker said. “Governance is better than it used to be, I just hope they strike the right balance between buccaneering and governance.”

Emirati officials said there was more co-ordination between the funds than people realise. In 2020, Abu Dhabi established a Supreme Council for Economic Affairs, which includes senior royals and chairs of investment vehicles. Its role includes coordinating the strategies of state funds.

Suwaidi said if both ADQ and Mubadala were looking at the same deal they would co-ordinate — both invested in Getir’s funding round in June.

“In some instances we pull out, or they pull out . . . competition you will hear from the UAE leadership is healthy,” he said. “Our aspirations are big and I think in the next five years our targets are very big.”