Luca Molinari: How Smart Capital Stays Patient

Private equity today is shaped by a very different set of realities than it was a generation ago. 

Our Co-CEO of Private Equity, Luca Molinari, reflects on how the industry has evolved from a model driven largely by transactions and financial engineering to one increasingly focused on operational partnership, long-term value creation, and resilience through cycles. 

Luca shares how Mubadala approaches investing across sectors and geographies, and why flexibility has become a critical advantage in an environment defined by technological disruption, longer investment horizons, and growing global complexity. He also discusses the shift from isolated portfolios to more interconnected ecosystems, where collaboration across businesses can strengthen performance and adaptability.

The conversation explores how artificial intelligence is reshaping industries and investment frameworks, and why understanding people, leadership, and culture remains central to navigating structural change.

Drawing on his experience across Europe, Latin America, the Middle East, and Asia, Luca reflects on investing through cycles, adapting to different business environments, and maintaining a long-term perspective amid uncertainty and transformation. 

From ecosystem-building and thematic investing to AI and global leadership, this episode offers a perspective on how private equity continues to evolve in a changing world.

(00:00) Private equity’s evolution over three decades

(02:16) Seeing through cycles with patient capital

(03:31) Inside Mubadala’s private equity strategy

(09:48) Why ecosystems matter more than portfolios

(13:14) Selectivity, flexibility, and long-term thinking

(16:32) The new reality of value creation

(19:11) AI and the widening range of outcomes

(22:41) The cultural side of global investing

(25:33) Private equity’s rise into the mainstream

(27:35) Patient, purposeful, and balanced investing

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Transcript

Private equity’s evolution over three decades

Mustafa Al-Rawi 0:00

I'm delighted to welcome to the exchange today Luca Molinari, co-CEO of Private Equity at Mubadala. Welcome, Luca. Thank you very much. It's a pleasure to be here. I'm very excited to have this discussion today because through the arc of your career, more than a quarter century, if I'm allowed to say a quarter century, it's quite a bit of time. You've seen how private equity has actually evolved since the late 1990s. And from your point of view, if we kind of take a bigger picture, you know, where are we in the in the journey of private equity as you see it?

Speaker 1 0:35

Yeah, it's been almost 30 years actually since I started in this industry. And , funny enough, I do go down memory lane every now and again to reflect on how the industry has changed. And a good way to contextualize it is if you look at size, the unit of measure has changed from billions to trillions. But it's not just size, it's the complexity, the extent of and the nature of participants in the industry, from investors to capital providers to entire sectors of the economy that have been impacted, it's been a remarkable transformation under many many dimensions. If I look at where the industry is today, we may say that it's still in a slow phase compared to three or four years ago. If you look at any metric, whether it's investment activity, exits, fundraising, we are around 30% off the peak years. This is not a surprise. It's always been a cyclical industry in many respects. It's just given the size and the complexity of the industry today, these cycles are felt wider and longer.

Mustafa Al-Rawi 2:03

I mean it's interesting that you're talking about you know the arc and the the size and complexity of the industry, and because immediately what I start to think is okay, what does that mean for Mubadala?

Seeing through cycles with patient capital

Speaker 1 2:15

Yeah, it's a great question. For us at Mubadala, the current context gives us a pretty good opportunity to invest patient capital in high quality businesses in partnership with like-minded people and support those businesses as they continue in their growth aspirations and their journey. We are not market timers at the end of the day. We invest capital through the full cycle, pick, trough, and anything in between. And our business consists in being able to see through these cycles.

Mustafa Al-Rawi 3:01

Yeah, in a bit I'd love to talk through what you mentioned there about being able to invest through peaks and troughs and having that flexibility and that's what Mubadala gives you. But but perhaps it's worth understanding how does private equity fit into the the framework of Mubadala today? Because you know, we will see the headlines of the big deals, we'll see the headlines every year of the growth. How does private equity work at Mubadala? Where do you sit?

Inside Mubadala’s private equity strategy

Speaker 1 3:30

Yeah, Mubadala is a large sovereign investment institution. We overall at group level have something like $385 billion of assets under management. Private equity represents about 20% of these asset base, and our mandate consists mostly in making direct investments in global businesses across a number of verticals.

Mustafa Al-Rawi 4:06

When I think of private equity, Luca, I imagine you know you go out, you raise money from investors, you close a fund, you then deploy that capital into investments, and then five, seven years later you get an exit. Is that what it looks like for you?

Speaker 1 4:24

Yes and no. The yes to the question is yes, we do invest capital into attractive companies and we stay invested for a number of years. There is no fixed time frame for exit. You exit when when the time is right, when when there has been sufficient value creation, and when we take the view that for whatever reason the right thing to do is to divest out of the business and redeploy capital into more attractive opportunities. What's different between Mubadala and the traditional private equity industry is the fact that we invest our own capital. We don't invest third-party capital. So we we are answerable to ourselves and our shareholder, the government of Abu Dhabi. This gives us even more flexibility on how we time our activity, how we pace ourselves and how we look at value creation. In Mubadala Private Equity we are thematic investors. We have a view on which sectors we want to be invested in, and we have teams dedicated to financial services, healthcare, consumer, technology, industrial and business services, energy and sustainability, and we also have a team dedicated to Asia. We have an office in Beijing and teams in Abu Dhabi dedicated to other Asian markets for us is one of our priorities alongside the the other sectors that I've mentioned.

Mustafa Al-Rawi 6:19

So thematic and regional approach as well. Indeed. Yes. And you mentioned that you're answerable to yourselves, answerable to Mubadala. So then how does that relationship work sort of when it comes to making those investments, to you know to working with the other platforms within Mubadala?

Speaker 1 6:39

As we said before, Mubadala manages $385 billion of assets, and we do it across a broad range of strategies and risk reward profiles. Private equity accounts for approximately 20% of the overall asset base, and other parts of Mubadala include the Abu Dhabi Investment Council, our real assets business, credit and special situations as well as our domestic businesses, UAE investments. We each operate in a distinct part of the risk reward equation, but we all fit together to make sure that Mubadala achieves its performance objectives within a clearly stated risk profile framework. Compared to other parts of Mubadala in private equity we operate within a slightly higher bracket of the of the of the risk-reward spectrum. Higher, meaning that we are expected to contribute to a performance which is above the average of what we target as a group. And together with that we take a little bit more risk when it comes to when it comes to underlying. Equity is riskier than fixed income and and real assets, and within equity, private equity is expected to generate superior performance to listed equities over a long enough period of time. So this is how private equity fits within the overall Mubadala configuration. But we do work very, very closely. As Mubadala, we do thrive on collaboration and cross-fertilization across the various parts of the organization.

Mustafa Al-Rawi 8:55

It it's almost like a sort of diversification strategy in terms of risk and return within within the business itself.

Speaker 1 9:02

It's it's diversification with the benefit of collaboration and interaction across the various parts of Mubadala.

Why ecosystems matter more than portfolios

Mustafa Al-Rawi 9:13

Yeah, and and I think that that kind of holistic approach it really does resonate in terms of the values of Mubadala more broadly as well, and kind of as a theme that we'll keep coming back to in the conversations that we'll have in The Exchange. But I would say as well, to pick up on a point earlier, when you were talking about themes, you were talking about regions. I've I've heard the phrase building ecosystems, not just portfolio. Now, is that in terms of themes and and regions and how you're choosing your investments?

Speaker 1 9:47

Yes, it is. It is. We use that phrase quite a lot in our discussions and reflections. To me, from portfolio to ecosystem, it's an evolution rather than a dichotomy. It starts with portfolio construct. if I look at how Mubadala has evolved as a private equity investor, we begin with making separate discrete investments into businesses that are not obviously related to one another. And as you said, the main idea is to build enough quality and diversification at the same time. Then we start thinking about how we can leverage this portfolio and generate more sustainable performance over time. And that's when the ecosystem concept comes into play. Ecosystem means portfolios become building blocks. Portfolio companies become building blocks in a broader platform that benefits from connectivity and collaboration. Examples include our health care portfolio. Again we started by making separate investments in the health care space. If I look at the portfolio now, the portfolio spans all the way from pharmaceutical to all the enabling infrastructure, CDMOs, drug development, drug discovery.

Mustafa Al-Rawi 11:46

So as I understand it, and you know if we take the example of your healthcare investments, we might see a single investment and only think of it in terms of the value that we can create out of that investment. But what you're describing is where if you if you're able to step back, if you have that broader view, you can see the points that will all eventually connect up to create even even more value beyond just that one investment.

Speaker 1 12:15

Get together once or twice a year and discuss these themes that , as I said before, will impact older companies at some point in the foreseeable future.

Mustafa Al-Rawi 12:29

I mean I think that that brings you know brings up the point and I want to get into of how deeply or how hands-on you might be in terms of of running these portfolio companies or supporting these portfolio companies. But but if we kind of go back to what you were saying at the beginning of the conversation about peaks and troughs and being able to invest through them rather than maybe being buffeted by the cycles, you know, the PE business is is a business of cycles. Is that what Mubadala gives you, it gives you that flexibility and that ability to build an ecosystem rather than simply going for those outsize returns, which of course is a huge KPI for you, but but that that Mubadala gives you that ability to approach it that way.

Speaker 1 13:14

Absolutely, absolutely. It's being being able to invest being in the position to invest our own capital and not having to worry about the implications and the ups and downs of the fundraising cycle, having having to think about LPs, paying fees on committed capital and expecting to see activity on the one hand, and on the other hand, having LPs to expect distributions at a given point in time to fund the the next fundraising. Not having that, it's a it's a big benefit for us. Now, private equity. let me take a step back. Private equity is if you think about it, it's a it's a needle in a haystack business. We spend a lot of time reviewing several opportunities. In any given year, the team reviews about 200 different things. We spend time on maybe 50 or 60 and we get maybe 10 or 12 done. So it's it's a high mortality business, for lack of a better expression. That's an industry thing, it's not just us. Private Equity is a highly selective business. And Mubadala having that flexibility of not having to worry about fundraising cycles and dynamics, it gives us the ability to be even more selective and support our portfolio companies at any point in the cycle. Again, that being the only thing we have to worry about.

Mustafa Al-Rawi 14:57

I mean, I want to go back to the the support of your of your ecosystem. Your I'll use ecosystem rather than portfolio of companies. You know, you talk about bringing them together, harnessing you know the power of the group, harnessing the fact that they all complement each other in the value chain of that industry.

Speaker 1 15:17

We all work together towards the common objective, which is creating value for everyone involved in the medium to long term. We do that as directors at board level. We do it as part of our engagement with the shareholders, and so it's an iterative process. We are not activists, we are active not activists. We don't send our people inside the company second guessing management teams, left, right, and center. We are active as investors. There are situations where after making an investment things don't go exactly according to plan. And again, in those situations, in the same way, we sit down, we discuss, we reflect, we decide what the best course of action is to rectify things that need correction. We double down on things that are working well. This is how we are involved with managing our investments and interacting with other stakeholders.

Mustafa Al-Rawi 16:32

I mean when when it comes to to sort of creating value for those portfolio companies, I mean you talked about collaboration, you're talking about partnership, very important. One of the sort of big themes in these days with technology, AI, other forces at work is this idea of convergence. Every industry is ultimately converging. It seems that for when you're talking about the healthcare example, you're also seeing that each business cannot operate in silo. And is that the main driver of value when you when you're making these investments, that you you show these portfolio companies that by working in collaboration with other businesses in the ecosystem that they can they can grow and and become more valuable?

Speaker 1 17:14

Yeah, it's it's a good example. Going back going back to a comment that you made earlier on, the private equity world has changed from buying cheap slash cost exit quickly, to now it's buy right, work hard with your management teams and and fellow shareholders and drive value for the longer term. The world has become just too efficient, too competitive for the old recipe to work. There are just not enough, obviously, cheap businesses to buy and and turn around quickly. I t's a grind. It's a grind. This is why, in general, investment periods are taking longer than before, and exits are becoming more time-consuming to execute. It's not just the ups and downs of the financial markets. It's the consequence of this job this way of investing having become more complex than what it was the case before.

Mustafa Al-Rawi 18:35

I mean that word you used grind is really illustrative of where we are, and and I come back to sort of this strength that you have of being within an institution like Mubadala that has longer term horizons that is thinking in terms of a responsible investor, a human-centric approach. And we're in an era now where each sector is being changed by trends that are so common. And Mubadala has that view across sectors, and that must really support you in terms of looking at how these trends can be harnessed for value creation.

AI and the widening range of outcomes

Speaker 1 19:10

Absolutely. Let's take let's take AI, which is very, very popular for lack of a better description these days. Artificial Intelligence where we are today reminds me a lot of what internet meant for a broad range of business models when I started my career in private equity. It's one of those inflection points where the range of outcomes all of a sudden becomes a lot wider than it was before. We are spending a lot of time on the technology side, on the creation of artificial intelligence, but we are spending a larger amount of time on how the adoption of AI will reshape every business we invest in across all the sectors that I've mentioned before in which we invest, and how these businesses will be able to stay ahead of the curve because it's a reset moment in many respects. And again, having a global portfolio, having the ability to look at how our 120 portfolio companies react to these trends, gives us a very, very powerful insight on what the future might look like.

Mustafa Al-Rawi 20:38

I mean AI is obviously very important when it comes to value creation, you know, to get it right. The stakes are very high. But equally, you know, talent management, what we called ESG, and now we call responsible investing, there are other levers that you have to pull in PE to support the growth of your of your investments.

Speaker 1 20:58

Yeah, absolutely, it's a people's business at the end of the day. We we all have access to extremely effective and powerful tools to analyze financial performance cash flows, and we now can model a lot of different scenarios in hours or minutes with AI. What will continue to make a difference, in my view, is the people dimension. Are we backing the right management team? Are these group of people resilient enough to cope with the inevitable curveball, the unexpected changes that will come our way in the next five, seven, ten, fifteen years during which we're gonna be invested in this business? These are things that again experience, exposure to many situations, give us a little bit of additional insight on. And the key question when it comes to performance and whether or not we're gonna be able to achieve our objective is sustainability. Not in a strictly ESG connotation, but are we going to be able to sustain that level of performance consistently the right way over a long enough period of time? At the end of the day, going back to the basics is about the quality of the people that we decide to back.

The cultural side of global investing

Mustafa Al-Rawi 22:40

Yeah, you mentioned people, and you've you've worked in many different regions. I mean you're now based in Abu Dhabi, but you've been in Europe, you've been in Latin America, you've seen how the cultures can affect success. And when you look back, you said you often take trips down memory lane. I'll make you take another one now. And when you look back and you think about all the different regions, how is that informing what you're doing today?

Speaker 1 23:10

It's been an incredible journey, and again, I was able to see, experience and live through various cultures from the day to day to the way business is conducted. I started in in London working primarily in Europe with European companies, European management teams, European businesses. Through the years I had a lot of exposure to the US and North America. And in the first phase of my career, I got pretty well used to the Anglo-Saxon way of doing business where everything is more or less clear, direct, transparent, and what you take away from important meetings is what was actually said in those meetings. Then when I operated in Latin America and the Middle East and Asia, you need to shift your mindset and be able to be equally effective in different cultural contexts. It's just different, it's just different. And at the beginning, when I tried to apply Anglo-Saxon frameworks to Latin America or Asia, I wasn't getting too much traction because in some situations, in some contexts, in some cultures, the most important thing is what was not said at those important meetings. So yeah, it's the ability to navigate these cultural nuances ultimately can have a big impact in how investments turn out in terms of performance.

Mustafa Al-Rawi 25:09

I mean you mentioned starting out the late 90s, and you moved pretty quickly into private equity actually at a time when you know I'd argue that it was niche in terms of financial sector. Um and and over that time, you said nearly 30 years, what has probably been the most unexpected development in all that time when it comes to private equity?

Speaker 1 25:33

Yeah, we discussed it at the beginning. The size from billions to trillions, the complexity. How mainstream it has become, private equity used to be a small part of a portfolio of a very small category of investors, only the most sophisticated. Now it's a much more relevant portion of much larger portfolio involving institutions, family offices, even retail now is starting to get significantly more exposure to private equity as an asset class. To me, the most important development, the most unexpected development, is how much private equity has become part of high street of the mainstream of the economy. 30 years ago, not many businesses that you would think about, or you would come across within your day to day were owned by private equity. Now, it's almost the majority. It's hard to think about any sector in which there aren't large established players that are not somehow owned by private equity investors. That to me has been, I would not have expected this level of pervasiveness.

Mustafa Al-Rawi 27:10

You talk there about sort of almost the unexpected success. I mean in hindsight, we look back and think, wow, it would have been obvious maybe, but at the time you wouldn't have known how big it was going to be. And so, for yourself, your own attitudes towards investment risk, you know, how has that stellar success of private equity tested your own convictions in the course of your career?

Speaker 1 27:35

I would say that as a result of this, in many ways unexpected growth of private equities and industry, our actions, our decisions have become a lot more consequential, not just on us but the wider system, if I can describe it that way. Decisions that were made 30 years ago on specific investments had a much smaller scope for first and second degree consequences. Now, the implications are a lot wider. So, it made me not just more aware, more experienced, I would say it has made me much more responsible than I was before. Not that I was irresponsible, but I'm very aware of the consequences of making large investment decisions as part of a large institution like Mubadala.

Mustafa Al-Rawi 28:52

And so for any young professional starting out in Mubadala today, would that be your main kind of advice is to be conscious of the fact that as an investor today the the consequences of your decisions can be far reaching?

Speaker 1 29:09

That's one for sure. My other word of advice for people who are just getting started in this industry is be humble because it's a very humbling job. When I started in this industry 30 years ago, I thought private equity investors were like geniuses that are able to get everything right. It's not true. This is a a highly complex business where the number of variables is just too big for anyone to be able to have good control to determine the final outcome. You play the percentages. It's an industry where mistakes were always made, mistakes will continue to be made. So awareness, thoughtfulness, experience, are very very important. So my my word of advice for young professionals is stay humble and seek the support and the mentorship of experienced people. I cannot emphasize enough the importance of having had great mentors when I got started 30 years ago. It made a huge difference for me.

Mustafa Al-Rawi 30:40

And so if I was to ask you to sum up your investment philosophy in three words, would they be awareness and experience or are there other words that come to mind for you?

Speaker 1 30:56

Three words to summarize our investment philosophy. That's hard.

Mustafa Al-Rawi 31:01

It's hard because you're Italian.

Speaker 1 31:03

Yeah, no, I know.

Mustafa Al-Rawi 31:03

You're a wonderful speaker. Thank you very much. Thank you very much. You're very eloquent, and three words might be too narrow.

Speaker 1 31:09

Oh, or too many. I would say patient, purposeful, and balanced. Patient for all the reasons we said before, particularly at Mubadala. We have time, we don't have pressure from the outside world, and it takes time in this complex world to find strong conviction to deploy large amounts of capital into private equity businesses. Purposeful because, as we said before, we need to be responsible and aware of the consequences of our actions, and we are not a political organization and Mubadala, but being part of the Abu Dhabi ecosystem makes it very important for us to achieve success in the right way. Balanced because, as we said before, it's a complex business with many variables as part of a series of cyclical ups and downs. Balance doesn't mean always finding the middle ground. Balance means having the ability to be relatively aggressive when you have enough conviction, even at a point in time when others are pulling back, and vice versa. Having the ability to reflect and take a step back and not being carried away with doing things just because everyone else is trying to do things. So yeah, I would say patient, purposeful, and balanced.

Mustafa Al-Rawi 32:55

You're a deep thinker, Luca. I can tell that. And you know, if I ask you what inspires you, are there any books, any podcasts, any films, anything that you always think of in those moments when you need to remember your philosophy and you need to remember who you are and how you stay on track?

Speaker 1 33:19

I don't I can think of a specific moment of truth or major major points when I think about my own journey and how I think about investments. It's more like, how do you give yourself the best possible chance to do the right thing. So, it's about persistence, resilience in many in many respects. What comes to mind as I think about it is a quote that was attributed to Albert Einstein and I do go back to those words, which is " You never fail until you stop trying". That's how I would summarize my investment philosophy. Luca Molinari, thank you so much for being in The Exchange. Thank you very much. It was a pleasure. Thank you for having me.