The Scoop
THE SCOOP
Abu Dhabi’s sovereign wealth fund has held talks to buy a stake in a major US lender, HPS, people familiar with the matter said.
The deal continues one of the hottest trades among Wall Street firms: owning pieces of each other. In another similar investment, Blackstone is in talks to take a stake in Vitruvian, a London buyout firm with €16 billion, other people familiar with the matter said.
The current state of the talks couldn’t be confirmed.
The business of money managers buying stakes in other money managers is booming. From essentially a dead start in the early 2010s, there were 38 such deals last year, and new rivals are jumping in all the time. Blue Owl raised a record $12.9 billion fund to acquire stakes in other managers last year, and is already out raising its next.
Investors benefit from a share of steady management fees and a portion of profits when investments are eventually sold.
It’s a machine only Wall Street could invent, self-propelling and profitable. It can also turn a bit circular: Mubadala is already an investor (through a fund) in Blue Owl, which itself owns a stake in HPS.
A spokesman for HPS didn’t respond to multiple requests for comment. Blackstone and Mubadala declined to comment. Vitruvian didn’t respond to requests for comment. Bloomberg reported in March that Vitruvian was looking for investors.
HPS, which manages $117 billion, has been trying to go public but faces a frosty market that is just now showing signs of thawing. Stocks have been high enough to tempt companies, but chaotic enough to keep them away.
Liz’s view
Three big buyers dominate this business: Blackstone, Blue Owl, and Petershill, which used to be a unit of Goldman Sachs. Former Blackstone executive Bennett Goodman’s Hunter Point made a splashy debut in the spring. Mubadala makes a fifth player, and one with nearly unlimited money to spend.
Gulf states have been looking for footholds on Wall Street, with Mubadala buying Fortress last spring and another Emirati state arm, ADQ, having eyed a takeover of Lazard.
These deals are profitable. It can take a while for investors to get their money back — these are illiquid stakes of other illiquid stakes — but they generate a lot of cash from steady, predictable management fees. Annual returns can be in the high teens.
For HPS, this looks like a stopgap meant to a coming IPO that’s a bit further off than executives, who started priming the pump nearly a year ago, had planned. Getting a respected investor like Mubadala to write a big check warms the waters and essentially sets a floor under the eventual IPO price.