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February 2024
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AAM Magazine
February 2024
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Abu Dhabi SWF moves more investments in-house

The Abu Dhabi Investment Authority (ADIA), one of the world’s top sovereign wealth funds (SWFs) with an estimated US$773 billion in assets, said it is increasing the proportion of investments it manages in-house as it strengthens its internal capabilities.

In its latest annual report, the secretive fund disclosed that external fund managers managed 65% of its assets in 2014, compared to 75% in 2013. Index-replicating strategies account for 55% of all assets, ADIA said.

The fund, which employs about 1,650 people, said that the shift was as a result of “efforts over recent years to strengthen the organisation’s in-house investment and analytical expertise”. Senior hires over the last year or so include a new global head of external equities and a global head of research.

According to the report, ADIA posted 20-year annualised returns of 7.4% as of the end of 2014, up from 7.2% at the end of 2013.

Managing director, Hamad Bin Zayed Al Nahyan, however, expressed concern over this year’s slump in oil prices, along with divergence between the US, Europe and Japan in terms of economic recovery and monetary policy, as well as China’s slowdown, but was otherwise positive in his outlook.

“Equity markets ended the year mostly higher – except in economies dependent on oil exports – though returns measured in US dollars were diluted by the strong appreciation in that currency,” he said. “Bonds also did well, supported by low inflation and continued accommodative monetary policies.”

In terms of asset allocation, ADIA invests between 32% and 42% of its portfolio into developed equities; between 10% and 20% in emerging market equities; and between 10% and 20% in government bonds. Other asset classes with significant allocations include real estate, hedge funds and managed futures, and corporate bonds.

By market, North America accounts for between 35% and 50% of all investments, while developed Asia is allocated between 10% and 20% of the overall portfolio.

ADIA is among those Gulf SWFs that have sharpened their focus on Asia of late. Last month, it paid $2.4 billion for a 50% stake in three prominent Hong Kong hotels.

That deal came months after Qatar Holding bought a 20% stake in Lifestyle International Holdings, the operator of Causeway Bay’s SOGO mall, for $616 million.