Abu Dhabi sovereign wealth fund reports improved returns

13 September 2011

Abu Dhabi Investment Authority reports better returns following emerging markets shift

The Abu Dhabi Investment Authority (Adia) has reported a significant improvement in returns in figures released on 13 September.

In its 2010 annual report, which offers a rare glimpse into the performance and strategy of one of the world’s largest sovereign wealth funds (SWFs), Adia announced that its 20-year annualised return had improved from 6.5 per cent in 2009 to 7.6 per cent in 2010.

The fund’s 30-year annualised return improved marginally from 8 per cent to 8.1 per cent. In 2008, the 30-year annualised return was 7.6 per cent and the 20-year annualised return was 6.1 per cent.

“While remaining diversified across all major markets, Adia continued to benefit during 2010 from its decision a year earlier to tilt exposures in the portfolio towards asset classes and regions able to benefit from better growth prospects,” said the new managing director of the fund, Sheikh Hamed bin Zayed al-Nayan, in the fund’s annual report.

“This is an approach that remains in place in 2011,” he added.

As part of this strategy, Adia created two new equity investment portfolios during 2010, focused on investing in Latin America and India. It also decided to start expanding its exposure to higher yielding bonds and private equity in developing markets like Asia, Latin America and Africa.

Adia is estimated to have assets under management of $342bn, making it the second largest sovereign wealth fund in the world, according to the UK-based consultancy Monitor Group. Some estimates have put the worth of the fund as over $600bn though.

The fund says in its report that about 80 per cent of its assets are managed by external fund managers. Between 35 to 50 per cent of the fund’s assets are in North Amercia, with 25 to 35 per cent in Europe, 10-20 per cent in developed Asia, and 15-25 per cent in emerging markets, according to the annual report.

The publication of Adia’s annual report is part of the fund’s attempts to boast transparency and reassure the governments of countries it invests in that its intentions are benign. Adia said it was working towards “building understanding and maintaining trust with governments and regulators around the world. This is essential to ensure the continued free flow of capital, which is in everyone’s best interests especially during times of market disruption and uncertainty such as those experienced in recent years”. It is the second annual report published by Adia.

Bahrain’s Mumtalakat is considered one of the most transparent sovereign wealth funds in the Gulf, but its assets are significantly smaller than most of its regional peers at $13.7bn. It has started to publish yearly accounts of its assets and income.

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