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Sovereign wealth funds: Adia unveils key developments

Benefits from growth markets; Shake-up in equities division

The Abu Dhabi Investment Authority (Adia) has unveiled key developments in its structure and staffing as part of a gradual movement towards greater transparency.

The sovereign wealth fund published its second annual review last month. The review still lacked basic figures such as total assets under management (estimates are in the range of about $500 billion). Nevertheless, the fund again gave percentage figures for maximum and minimum allocations across various asset classes. It also showed that average annualized returns had increased, over a 20-year period, from 6.5% in 2009 to 7.6% in 2010, and over a 30-year period, from 8% in 2009 to 8.1% in 2010.

"While remaining diversified across all major global 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," managing director Hamed Bin Zayed Al Nahyan said in the report.

Allocations

Minimum and maximum allocations to developed and emerging market equities remained unchanged in 2010 at 35% to 45%, and 10% to 20%, respectively.

Meanwhile, in equities – Adia’s biggest division – teams have been restructured along less regionally focused lines. The internally managed equities department created two new portfolios in 2010: Active Latin America and Active India. Nevertheless, within the internally managed equities department, passively managed geographic portfolios were brought under a single team leader.

Portfolio managers and analysts within the passively managed internal equities department now rotate across regional portfolios. The aim, according to the fund, is to "promote collaboration and sharing of ideas within the team".

According to Bloomberg and Financial Times reports quoting anonymous Adia sources this August, a similar reorganization had occurred in 2011 in the much bigger externally managed portion of the fund. Two new units for actively managed and indexed funds have replaced four previous geographically organized departments for the US, Europe, the Far East and emerging markets.

Sheikh Mohammed Bin Khalifa Al Nahyan, the son of the UAE president, was appointed head of the indexed external equities at ADIA

"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"

Hamed Bin Zayed Al Nahyan, Adia

Sheikh Mohammed Bin Khalifa Al Nahyan, the son of the UAE president, was appointed head of the indexed external equities department. Obeid Al Suwaidi, formerly head of the Far East part of the external equities department, was appointed head of the new active external equities department, according to the reports.

The 2010 annual review particularly mentioned senior hires in the strategy and risk departments, as well as in the equities, real estate, and private equity divisions. Late last year, Ted Chu, formerly chief economist at General Motors in the US, joined as chief economist. Keith Collins joined as chief accounting officer from UK asset manager Schroders, where he was head of finance.

James Kester joined Adia’s private equity department late last year, as chief investment officer. He was previously head of private equity at Zurich Alternative Asset Management in the US.

Exposure

"[The private equity department] continued to gradually broaden its geographic exposure to include investments in developing private equity markets such as in Asia, Latin America, as well as certain more developed markets such as Australia," said the review.

Within fixed income and treasury, the fund increased exposure to portable alpha strategies. In real estate, the fund increased exposure to the hospitality sector, to distressed assets. It also developed its emerging market property platform as part of a focus on urbanization in rapidly growing countries.

In the actively managed commodities department, the fund restructured itself along more alpha-orientated lines. "This involved broadening the range of assets in which we invest to the entire range of commodities on a long/short basis, compared with our previous focus on agricultural commodities in directionally long-biased portfolios," said the review.

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