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Abu Dhabi fund sees more global ‘uncertainty’

Abu Dhabi, March 15, 2010

Abu Dhabi Investment Authority (Adia), one of the world's largest sovereign wealth funds, said the global economy still faces 'considerable uncertainty,' in its first annual review aimed at enhancing transparency.

The fund, believed to have assets of around $500 billion to $700 billion, said the sustainability of a global economic recovery was uncertain as governments were considering rollbacks of stimulus measures.

'Indeed, the timing and nature of exit strategies, will probably dominate the economic debate and outlook for quite some time,' Sheikh Ahmed bin Zayed al-Nahayan, Adia's managing director, said in the 2009 review, adding: ' ... considerable uncertainty remains about the outlook for 2010.'

Economic recovery may be slower in developed markets, with higher interest rates and taxes hampering growth, Sheikh Ahmed wrote in a letter published in the first annual review.

The secretive $3 trillion SWFs, which invest national windfalls for future generations, have faced pressure to open their books and enhance transparency. Such funds have come under scrutiny as concerns grew in Western capitals that investments were made with political rather than commercial motives.

Leading sovereign funds formed the International Working Group of Sovereign Wealth Funds in 2008, announcing a set of 24 principles and best practices, known as the Santiago Principles.

In a statement, Adia said the latest initiatives, including a revamp of its website with more information, underscores the fund's commitment to the Santiago Principles.

Asset allocation

The review provided details about Adia's 2009 global portfolio which includes investments in more than two dozen asset classes and sub-categories.

The fund -- whose assets range from Citigroup bonds to a stake in Britain's Gatwick airport to residential property in major cities -- has rarely given details of its investment strategy or investments.

Adia's funds returned 6.5 per cent on an annualised basis, over a 20-year period, as of Dec. 31, 2009. On the same basis, the fund returned 8 per cent over a 30-year period, it said.

At least 46 per cent of the fund's portfolio in 2009 was allocated to equities, with a minimum of 35 per cent in developed markets and at least 10 per cent in emerging markets.

Government bonds formed at least 10 per cent of its portfolio with a maximum allocation of 20 per cent. Adia also put a minimum of 5 per cent in alternative investments such as hedge funds in 2009, while private equity was given at least 2 per cent.

North America and Europe accounted for a major chunk of investments, with about 60 to 85 per cent going to the regions. Emerging markets constituted at least 15 per cent.

In January, Adia said it still saw big risks in the global economy and that it planned to refine its investment approach to cope with downturns.

The 2009 review did not provide details about the fund's balance sheet or its total assets under management. – Reuters




Tags: Citigroup | Transparency | ADIA | Abu Dhabi investment fund | Annual report |

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