IT’S ONE OF the most powerful financial
institutions in the world but little is known about it. The
Abu Dhabi Investment Authority has an influence in the
markets that few investors can match. It has unrivalled
access to the best strategists and advisers. Banks and fund
managers fall over themselves to win its business. It can
hire the brightest talent at home and abroad purely on the
strength of its name. Two things make Adia special. It
manages the emirate’s excess oil reserves,
estimated to be as much as $500 billion. Its portfolio grows
at an annual rate of about 10% compounded. As such Adia is
the world’s second biggest institutional
investor, behind only the Bank of Japan, according to the
Oxford Business Group. Its pulling power is immense.
According to a former HSBC banker, it’s one of
the few organizations Stephen Green, or his predecessor as
chairman of HSBC, John Bond, will drop everything to go and
see. They won’t be the only senior bankers and
corporate executives prepared to do this.
But what makes Adia so interesting is the veil of secrecy
that shrouds its activities. In the 30 years since it was
established, it has never publicly declared the amount of
assets it has under management. Its website lists just its
contact details; nothing more.
Money and mystery make a potent mix. It has helped Adia
create a unique aura. Any hint of what it’s
about to do can move markets. "That’s the power
of the Adia name," says Saeed Mubarak Al Hajeri, executive
director of the organization’s emerging markets
There is little that catches the eye about the four
grey-brown buildings on 125 Corniche Street, where Adia has
its headquarters. Inside, too, the décor is plain.
There is no grand reception area or waiting room. The offices
are simple but spacious enough for the 1,300 people who work
there. It’s standard fare for a government
organization. Certainly there is nothing to suggest that this
is home to one of the world’s wealthiest
investors (although the organization is expected to move to a
more fitting waterfront skyscraper later this year).
Adia was established in 1976 by Sheikh Zayed bin Sultan Al
Nahyan, the founder of the United Arab Emirates. The goal was
to invest the Abu Dhabi government’s surpluses
across various asset classes, with low risk. It was a bold
move. At the time it was novel for a government to invest its
reserves in anything other than gold or short-term credit.
Even today, investment in short-term paper remains the
strategy for the vast majority of countries, although Kuwait,
Singapore and Norway have followed Abu Dhabi’s
Over the years, though Adia has become more sophisticated
as an investor, its central tenet has not changed. "We are
not speculators," says Al Hajeri. "We don’t like
to change companies or try to take out the management. We are
long-term conservative investors."
Diversification is the key to Adia’s
investment ethos. It invests in all international markets
– equities, fixed income, real estate, private
equity and alternatives (hedge funds and commodity trading
advisers – CTAs). This multi-asset approach helps to
Adia has one global portfolio, which is then broken down
into sub-funds covering a specific asset class. In equities,
for example, the specific asset classes include European
equities, US equities, Japanese equities, Australian
equities, regional small caps and emerging markets equities.
In fixed income, the specific asset classes include global
government bonds, global investment-grade credit, emerging
markets and global inflation-indexed bonds. Cash is another
separate asset class.
This segregation of specific asset classes allows for a
more specialist approach to investing. Jean-Paul Villain,
head of investment strategy, provides the example of
inflation-indexed bonds. "We did not want the guys in charge
of nominal government bonds to have the flexibility of
investing x% in inflation-indexed bonds," he says.
"It’s a proper asset class. It has [its own]
Each asset class has its own fund managers and in-house
analysts covering it. Each has its own benchmark and
guidelines. Each is managed through a range of investment
strategies and techniques. In emerging market equities, for
example, investments are made on a regional basis but also on
a country one for China and India.
In addition, some products employ both active and passive
investment styles, although the extent to which one style is
favoured over the other depends on the specific asset class.
Guidelines are tighter for government and inflation-linked
bonds, for example, than for emerging markets debt and
What further defines Adia is its use of third-party fund
managers to complement its in-house portfolio investors.
Almost every asset class is managed both internally and
externally. Overall between 70% and 80% of the
organization’s assets are managed outside. The
aim, says Al Hajeri, is to bring that down to between 60% and
70% without upsetting Adia’s low-risk