Abu Dhabi’s Mubadala Capital Takes Big Step Into US Credit Market

On Wednesday, the alternatives subsidiary of Abu Dhabi sovereign wealth fund Mubadala Investment Co. announced it will acquire a major stake in an LA-based credit manager backed by the family office of one of the most cavalier figures of Wall Street’s high-flying 1980s.

Middle East

Mubadala Capital, which manages $27 billion in assets, will take a 42% stake in Silver Rock Financial, which manages $10 billion in assets with a portfolio focused on high-yield debt and structured products. Mubadala has the option of increasing its stake to 50% over time.

The deal sketches out several new frontiers. Mubadala, and by extension Abu Dhabi, adds to a growing portfolio that suggests it wants to manage foreign capital, not just plunk down investments abroad or, like other sovereign wealth funds, let investment managers like Apollo or KKR navigate private markets on its behalf.

Last month, it announced plans to take private one of Canada’s Big Three investment firms, CI Financial, for $8.6 billion, promising the acquisition-happy CI more capital to extend a spree in which it has bought dozens of US-based registered investment advisory businesses — not to mention the backing of its parent, which has $302 billion in assets. Earlier this year, Mubadala completed a $3 billion acquisition of New York investment management firm Fortress, which has $49 billion in assets under management.

The Silver Rock deal will also see Mubadala, for the first time, take on outside investors:

• As part of the deal, paid for with an undisclosed sum of cash and stock, Silver Rock owners will become equity holders in Mubadala. That includes CEO Carl Meyer and the family office of billionaire Michael Milken, which Silver Rock was spun out of in 2016. 
• Mubadala and Silver Rock will continue to operate independently, with Meyer keeping his job and joining the board of Mubadala along with Josh Lobel, the CEO of M-Cor Capital, the Milken family office’s investment unit.

Trash for Cash: The Milken name should ring a bell. He is the (in)famous “junk bond king,” a billionaire who dominated the high-yield securities market on Wall Street in the 1980s (and pleaded guilty to securities violations after being indicted for fraud). He is the rare investment figure well known enough to be name-dropped in one of the most acclaimed episodes of The Simpsons.