ADIA Opens Up, Reveals Rising Long-Term Returns

(September 15, 2011) — The traditionally secretive Abu Dhabi Investment Authority (ADIA) has opened up a bit, releasing its yearly statement of what is perceived to be the world’s largest sovereign wealth fund.

Spurred by global economic growth, the fund revealed that annualised rate of return increased to 7.6%, compared with 6.5% in 2009.

“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,” Sheikh Hamed bin Zayed al-Nahyan, the managing director and a senior member of Abu Dhabi’s ruling family, wrote in the review. “This is an approach that remains in place as we enter 2011.” He continued: “While developed economies continue to demonstrate their ability to innovate and grow, the secular shift in global economic weight from developed to fast-growth emerging economies has accelerated as a result of the financial crisis.”

According to the report, ADIA’s assets are largely allocated to developed equity investments. With an estimated $342 billion in assets according to Monitor Group, the fund allocates 60% of its total portfolio to externally-managed indexed funds. Overall, roughly 80% of the fund’s assets are invested by external fund managers. Allocations to developed equity markets constitute 35% to 45% of the fund’s portfolio, the report showed. Emerging market equities make up 10% to 20%. Government bonds make up 10% to 20% of the portfolio.

In terms of geographic prevalence, ADIA allocates 35% to 50% in North America, 25% to 35% in Europe, 10% to 20% in developed Asia, and 15% to 25% in emerging markets, according to the report.

The report is the first to be released under Sheikh Hamed. He succeeded his older brother, Sheikh Ahmed bin Zayed Al Nahyan, who died in March 2010 in Morocco after his glider crashed into a lake near the capital of Rabat. The shift in power was not a surprise, reflecting an effort to keep control of the world’s biggest fund in royal hands.