GLOBAL - The investment returns of the Abu Dhabi Investment Authority (ADIA) amounted to 8% annualised in dollar terms over the 30 years to end-December 2009, and 6.5% over 20 years. This is according to the authority’s first annual report since its inception in its present form in 1976.
Toend-2008 the 30-year return was slightly less, at 7.6%, while the 20-year return amounted to 6.1%.
ADIA, which employs more than 1,200 people, invests in more than 24 investment categories and sub-categories, according to the report, with 80% outsourced to external managers and some 60% in index strategies. However, the report makes no reference to the overall size of ADIA’s portfolio, which has been estimated to exceed $650bn.
“Having increased the overall liquidity in our portfolio from early 2008, we began in 2009 to cautiously lift our exposure to higher growth markets, which proved effective as the recovery began to take hold,” wrote ADIA managing director Ahmed bin Zayed Al Nehayan, who hinted that emerging market allocations might continue.
“With higher interest rates and taxes likely in many countries, the upswing may be less pronounced than usual, at least in the more mature developed economies,” bin Zayed al Nehayan continued.
ADIA’s neutral benchmark allocation to emerging market equities is between 10-20%, according to the report, while developed market equities account for 35-40%. By region, the neutral benchmark allocation for emerging markets is 15-20%.
A strategy unit recommends the neutral benchmark based on an acceptable level of risk and an asset class analysis. The authority’s strategy committee reviews any proposed changes to the neutral benchmark, followed by the investment committee prior to a recommendation to bin Zayed al Nehayan, the managing director.
Last year ADIA created an investment services department to centralise a range of existing risk, compliance and performance functions. Other risk control mechanisms operate at departmental level, the annual report said.
“This publication, coupled with our role as co-chair of the International Working Group of Sovereign Wealth Funds, underscores ADIA’s commitment to the Santiago Principles, a comprehensive multilateral framework reflecting the principles and practices of Sovereign Wealth Funds,” said Euart Glendinning, global head of corporate communications and public affairs.
ADIA, which is independent of the government of the Emirate of Abu Dhabi, started investing in alternatives in 1986 and in private equity in 1989. The report states that ADIA does not invest in practice in the Gulf Region, other than when such investments form part of an index.
ADIA’s predcessor, the Abu Dhabi Financial Investments Board, was created in 1967, with mandates to UBS, Robert Fleming, Morgan Guarantee Trust and Indosuez.
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