Abu Dhabi Embraces Wall Street-Style Compensation for Hedge Fund Talent Creation

Abu Dhabi's shift to Wall Street-style pay has created multimillionaires within Mubadala Capital and Lunate. The decision to offer carry has helped lure talent away from firms like Apollo and Carlyle. Gulf funds are accelerating direct investments in tech, healthcare, and renewable energy, and are using carry to attract top private equity talent.

Abu Dhabi's sovereign wealth funds are adopting Wall Street-style compensation structures, including carried interest, to attract and retain top-tier talent. This shift has created multimillionaires within Mubadala Capital and Lunate, and is helping these funds lure talent away from established private equity firms like Apollo and Carlyle.

Carried interest, or "carry," is a performance-based compensation structure where executives receive a share of the profits generated by the investments they manage. This structure is already in use at some Abu Dhabi-based firms, with employees at Mubadala Capital and Lunate receiving a form of carry as part of their pay [1].

The Middle East's investing giants, including the Abu Dhabi Investment Authority (ADIA) and Mubadala Investment Co., are seeking to deploy their vast oil wealth into industries such as artificial intelligence, sustainable energy, and healthcare. To achieve this, they need top talent with private equity experience, and carry is proving to be a powerful magnet for these ambitious candidates [1].

While historically, Gulf funds relied on low tax regimes and lifestyle perks to attract staff, the competition for talent has grown more intense in recent years. The introduction of carry structures is a significant shift, helping these funds compete with global private equity firms for top talent [1].

Mubadala Capital, the asset management subsidiary of Mubadala Investment Co., has already seen success with this approach. The firm's decision to offer carry has helped create multimillionaires within its ranks, according to George Sames, managing director at the recruiting firm Oneira Talent Solutions [1].

The funds' new strategy is not without challenges. The region's biggest aluminum producer, Emirates Global Aluminium (EGA), is also weighing an initial public offering (IPO) that could rank among the largest-ever share sales in the Middle East. However, the choice of listing venue and the feasibility of the IPO remain uncertain [2].

Representatives for the involved funds declined to comment on the specifics of their compensation structures and IPO plans. Despite this, the shift towards Wall Street-style pay is a clear indication of the Middle East's growing ambition to compete on the global investment stage.

References:
[1] https://financialpost.com/pmn/business-pmn/wall-streets-favorite-form-of-compensation-has-made-it-to-abu-dhabi
[2] https://gulfnews.com/business/markets/abu-dhabi-dubai-explore-multibillion-dollar-ipo-of-aluminum-firm-ega-1.500226189