Adia reiterates long-term investment commitments

20 July 2016

Returns for Abu Dhabi government-owned sovereign wealth fund dropped amid weaker global backdrop in 2015

Abu Dhabi Investment Authority (Adia) has said returns on its investments have slipped last year amid soft commodities prices and weaker and global economic backdrop, however, it will remain a long-term investor across asset classes.

In US dollar terms, the 20-year annualised rate of return for the portfolio of Abu Dhabi government-owned investment vehicle dropped to 6.5 in 2015 from 7.4 per cent recorded at the end of 2014. The 30-year value slid to 7.5 per cent from 8.4 per cent for the same period, according to the company’s annual review posted on its website.

“The contours of the post-crisis world have become clearer. Economic growth is slower but also more differentiated across regions and industries,’’ managing director Sheikh Hamed bin Zayed al-Nahyan said in the review, adding that financial assets, with a few notable exceptions, appear fair-valued, pointing to the probability of future returns being below historical experience.

“Against a backdrop of slowing global growth, Adia’s investment strategy will remain focused on identifying long-term trends and patiently growing capital,” he added.

Adia has invested across asset classes globally for four decades. The fund doesn’t provide financial details or the overall size of its portfolio invests a maximum of 42 per cent and minimum of 32 per cent to developed market equities, which is the biggest component of its portfolio. It investment strategy allows a maximum of 20 per cent and a minimum of 10 per cent exposure to emerging market equities. The other assets classes in which Adia actively invests include small-cap equities, government bonds, Credit instruments, hedge funds and managed future, real estate private equity, infrastructure and cash assets, according to the review.

In terms of geographies, the fund’s overall long term portfolio exposure could fluctuates between 35-50 per cent in North Africa, between 20-35 per cent to Europe and between 15-25 per cent in emerging market.

The US-based Sovereign Wealth Fund Institute, which tracks the industry, estimates Adia portfolio is worth $792bn, according to news agency Reuters.

Currently, the proportion of its assets managed by external fund managers is 60 per cent, while 50 per cent of its assets are invested in index-replicating strategies.

Key acquisitions in 2015 included assets in the U.S warehouse market, a 50 percent stake in a portfolio of Hong Kong hotels, an investment in Germany’s motorway services group Tank & Rast, and Transgrid, an electricity transmission business in New South Wales, Australia. Last year also saw the completion of a direct investment by ADIA in ReNew Power, one of India’s largest clean energy companies.

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