The Abu Dhabi Investment Authority (Adia) has recorded a rise in long-term returns as it hired more staff and reduced its reliance on external fund managers.
Investments generated returns of 7.6 per cent at the end of last year, compared with 6.9 per cent a year earlier, measured in US dollars over 20 years. Returns averaged 8.2 per cent over 30 years, inching ahead of the 8.1 per cent achieved a year earlier. The fund does not disclose annual performance.
“The challenge to long-term investors in this great period of transition in economic configurations is to be an active participant,” said Sheikh Hamed bin Zayed Al Nahyan, the managing director of Adia, in its annual review published yesterday.
“Investment in the emerging world is necessary to fuel its continued growth. Broad exposure to these markets is necessary for large global portfolios that seek sustained real returns on capital.”
The fund reduced its overall exposure to developed market equities to a range of between 32 to 42 per cent from 35 to 45 per cent a year earlier. At the same time it cut its lower investment threshold for Europe to 20 per cent last year from 25 per cent in 2011. The maximum allocation was unchanged at 35 per cent.
“Economic leadership is passing to emerging markets, not just as their weight in the global economy passes 50 per cent but as their share of likely future global growth moves far higher,” added Sheikh Hamed. “These countries are diverse and their individual prospects may vary, but as a bloc they continue to offer exciting and attractive opportunities to deploy capital.”
Rebounding global equities markets have boosted the returns of sovereign wealth funds from Africa to Asia this year. Last month, Norway’s sovereign wealth fund said assets grew by US$37 billion in the first quarter of the year. Norway’s $728bn Government Pension Fund Global generated returns of about 5.4 per cent in the first three months of this year.
Adia also benefited from the strong performance of global equities last year, which outperformed all other major asset classes.
“Looking forward, we expect equities to remain attractive on a relative basis as bond yields hover at historically low levels and investors look to deploy some of their significant cash reserves,” the review said.
Since being formed in 1976, Adia has grown to become one of the world’s largest sovereign wealth funds, investing on behalf of the Government of Abu Dhabi and focusing on long-term returns.
Adia hired about 125 staff over the year to bring its total head count to almost 1,400 as it reduced the assets managed externally. About 75 per cent of Adia assets were managed by external fund managers last year compared with about 80 per cent of assets a year earlier.
Since then it has appointed a number of senior financial professionals including John McCarthy, its recently hired global head of infrastructure who previously worked at Deutsche Bank, where he was global head of its infrastructure investment business.