Tough time ahead for sovereign fund chief
Dubai, April 5, 2010
The new head of the world's biggest sovereign wealth fund, whose appointment is expected imminently, will need to find a balance between delivering consistent returns and conservative values, say industry observers.
The top role at Abu Dhabi Investment Authority (ADIA), has been vacant since Shaikh Ahmed bin Zayed Al Nahayan, a younger brother of the ruler of Abu Dhabi, who is also president of the UAE, died in a glider plane crash last month. In its first annual review, the fund with assets of $500 to $700 billion, provided a rare glimpse into its portfolio, with an allocation of up to 85 per cent in developed markets.
Although ADIA funnelled funds from the emirate's oil exports into overseas stocks and bonds under Shaikh Ahmed, the new chief will soon find that heavy exposure to developed markets may not yield the kind of returns the fund has enjoyed over the years and will need to look at emerging markets for growth.
The fund returned 6.5 per cent on an annualised basis over a 20 year period.
'Bearing in mind macro prospects for the couple of years ahead and the low developed countries growth versus higher emerging countries growth, one challenge for ADIA will be to diversify the portfolio to capture... growth opportunities from emerging markets,' said ING Middle East and Africa senior economist for wholesale banking Dorothee Gasser.
'In spite of its sophistication, ADIA is still a government-owned entity and... thus has still to keep a certain amount of conservatism in strategies,' said Gasser.
Shaikh Ahmed, ranked number 27 on Forbes list of the world's most powerful people last year, also moved the firm's investment strategy from that of an active fund to more of a passive one, focusing more on index-tracking funds.
A succession plan for the sovereign fund has been set and will be announced within days, a source said.-Reuters
More Finance & Capital Market Stories
- Egypt regulator sets rules for index
- Dubai Islamic eyes Kenya, Indonesia for expansion
- ADCB to buy back 3pc of its shares
- GCC insurance growth outpaces developed markets
- Bahrain 'faces budget deficit, inflation challenges'
- Global Payment Services wins key certification
- BBK unveils big India expansion plans
- Kuwait GDP growth to hit 3.5pc in 2014
- Gulf shares tumble over EM exposure cut
- GCC bonds to gain from macro-economic climate
- French Business Council Dubai members up 18pc
- Egypt economy growth seen less strong than thought
- Sharjah approves $4.2bn budget for 2014
- Saudi non-oil sector posts solid growth in Feb
- Seera total income rises to $34m
- NBAD approves 40pc cash dividends
- NBAD sees 8-10pc loan growth
- Al Basel Group launches investment arm
- Union Insurance posts $18m profit
- Oman warns banks on conflicts of interest
- Japan to lend Tunisia $480m
- 400 to join anti-laundering seminar in Riyadh
- Lebanese insurer to head Prague Club
- UAE's first REIT plans $135m IPO
- Bahrain banking industry outlook 'positive'
- New India Assurance opens Bahrain branch
- Qatar sets up mixed business incubator
- Kuwait budget spending up 8pc in April-Jan
- Thomson Reuters to host Mena IFR awards
- ADIB offers smartphone industry investment