Middle East Sovereign Wealth Funds Embrace Private Equity-Style Compensation

Abu Dhabi sovereign wealth funds are adopting private equity-style compensation, offering carried interest awards to lure top talent from Wall Street firms. This shift is driven by a growing competition for finance talent in the Middle East, where local funds are seeking to diversify their economies and deploy billions of dollars. The trend is already seen at firms like Mubadala Capital and Lunate, which offer a form of carry to employees, creating multimillionaires within the company.

Abu Dhabi's sovereign wealth funds are increasingly adopting private equity-style compensation packages, including carried interest awards, to attract top talent from Wall Street firms. This shift is driven by a growing competition for finance talent in the Middle East, where local funds are seeking to diversify their economies and deploy billions of dollars in investments.

The Abu Dhabi Investment Authority (ADIA), Mubadala Investment Co., and other Gulf funds have traditionally relied on low tax regimes and lifestyle perks to lure employees. However, the influx of banks, hedge funds, and private equity firms opening local outposts has heightened the competition for skilled personnel. To remain competitive, these funds are now offering carried interest, a form of compensation tied to investment performance, to high-level executives.

Mubadala Capital and Lunate, subsidiaries of Mubadala Investment Co. and ADIA respectively, have already implemented carried interest structures. These funds have successfully lured talent away from established private equity firms like Apollo Global Management Inc. and Carlyle Group Inc. by offering the potential for multimillion-dollar payouts based on investment performance.

While carried interest is typically tied to actual ownership stakes in private equity firms, Gulf funds often use "phantom" or "shadow" carry, which replicates the benefits of carried interest without transferring equity. This arrangement is attractive to ambitious candidates seeking uncapped earning potential tied directly to their performance.

The adoption of carried interest is part of a broader trend in the Middle East, where sovereign wealth funds are hiring more talent from Wall Street firms to advance their presence in industries such as artificial intelligence, sustainable energy, and healthcare. For instance, MGX, a new Abu Dhabi-based fund, has hired executives from Warburg Pincus and Apollo to support its goal of eventually topping $100 billion in assets.

The introduction of carried interest is not without challenges. The funds need to compete with established private equity firms like Brookfield Asset Management Ltd. and Blackstone Inc., where senior partners can earn tens of millions of dollars from successful portfolio sales. However, the slowdown in dealmaking and IPOs globally has made it easier for Gulf funds to attract talent by offering the potential for significant personal wealth.

The shift towards private equity-style compensation is not limited to Abu Dhabi. Deloitte Middle East has launched ME Tax Pulse, a next-generation mobile app designed to deliver timely tax insights to professionals across the region. This app includes an AI Assistant that enhances decision support and maintains professional integrity, reflecting the broader trend of leveraging technology to attract and retain top talent.

In conclusion, the adoption of carried interest awards by Abu Dhabi's sovereign wealth funds is a strategic move aimed at attracting and retaining top finance talent. This shift reflects the region's growing competition for skilled personnel and its desire to diversify its economies and deploy vast amounts of capital.

References:
[1] https://www.bloomberg.com/news/features/2025-08-07/abu-dhabi-wealth-funds-face-pressure-to-offer-carried-interest-awards
[2] https://www.zawya.com/en/world/middle-east/deloitte-middle-east-introduces-me-tax-pulse-as-next-generation-mobile-app-tb2h8zc2