Abu Dhabi Investment Council (ADIC), a unit of Mubadala Investment Company, is preparing to significantly expand its exposure to global hedge funds through a proposed $15 billion leveraged investment, according to sources familiar with the matter. The move would represent one of the largest commitments by an emirate-based institution to the hedge fund sector.

ADIC is collaborating with local banks to deploy capital using total return swap facilities, which enable leveraged exposure by receiving the full economic returns of hedge fund investments without taking direct legal ownership of the underlying assets. This approach allows the council to amplify its investment scale but also increases the potential risk, as losses can escalate more rapidly than with traditional direct investments.

The council’s strategy focuses primarily on multi-strategy hedge funds that have maintained steady positive performance in recent years, though it remains open to other investment approaches within the sector. This initiative follows ADIC’s recent participation in a $2 billion capital raise for ExodusPoint Capital Management, a firm led by Michael Gelband.

Shiv Srinivasan, ADIC’s chief investment officer for hedge funds, highlighted the role the asset class has played within the council’s portfolio. He noted that hedge funds have consistently delivered steady returns across varying market environments and continue to offer diversification, downside protection, and attractive risk-adjusted returns through different economic cycles.

The use of total return swaps signals a strategic intention to accelerate the institution’s allocation to hedge funds, reflecting a broader trend across the region. Abu Dhabi and Dubai have increasingly become hubs for hedge fund operations, attracting major global firms such as Millennium Management and Brevan Howard Asset Management. These firms have been drawn by the presence of substantial sovereign and private capital, as well as favorable regulatory and business environments.

While the leverage embedded in total return swap agreements can enhance returns, it also increases the risk profile of ADIC’s investments, a factor under careful consideration by the council. The expansion into hedge funds aligns with a wider appetite within the Gulf region to diversify investment portfolios and capitalize on alternative strategies that can perform in both growth and volatile markets.