Park Place Residences (Paya Lebar Quarter) is a Mixed Development By Lendlease & Abu Dhabi Investment Authority (ADIA)
The Abu Dhabi Investment Authority (ADIA) is a sovereign wealth fund owned by Emirate of Abu Dhabi (in United Arab Emirates) founded for the purpose of investing funds on behalf of the Government of the Emirate of Abu Dhabi.
About Abu Dhabi Investment Authority (ADIA)
IT’S ONE OF the most powerful financial institutions in the world but little is known about it.
The Abu Dhabi Investment Authority has an influence in the markets that few investors can match. It has unrivalled access to the best strategists and advisers. Banks and fund managers fall over themselves to win its business. It can hire the brightest talent at home and abroad purely on the strength of its name.
There are 2 things that makes ADIA worth your attention. It manages the emirate’s excess oil reserves, estimated to be as much as $500 billion. Its portfolio grows at an annual rate of about 10% compounded. As such ADIA is the world’s second biggest institutional investor, behind only the Bank of Japan, according to the Oxford Business Group. Its pulling power is immense.
According to a former HSBC banker, it’s one of the few organisation Stephen Green, or his predecessor as chairman of HSBC, John Bond, will drop everything to go and see. They won’t be the only senior bankers and corporate executives prepared to do this. But what makes ADIA so interesting is the veil of secrecy that shrouds its activities. In the 30 years since it was established, it has never publicly declared the amount of assets it has under management. Its website lists just its contact details; nothing more.
Money and mystery make a potent mix. It has helped ADIA create a unique aura. Any hint of what it’s about to do can move markets. “That’s the power of the ADIA name,” says Saeed Mubarak Al Hajeri, executive director of the organization’s emerging markets department. Certainly there is nothing to suggest that this is home to one of the world’s wealthiest investors (although the organization is expected to move to a more fitting waterfront skyscraper later this year).
History of Abu Dhabi Investment Authority
Since 1976, the Abu Dhabi Investment Authority has been prudently investing funds on behalf of the Government of Abu Dhabi with a focus on long-term value creation. The goal was to invest the Abu Dhabi government’s surpluses across various asset classes, with low risk. It was a bold move. At the time it was novel for a government to invest its reserves in anything other than gold or short-term credit. Even today, investment in short-term paper remains the strategy for the vast majority of countries, although Kuwait, Singapore and Norway have followed Abu Dhabi’s lead.
Conservative ethos Over the years, though ADIA has become more sophisticated as an investor, its central tenet has not changed. “We are not speculators,” says Al Hajeri. “We don’t like to change companies or try to take out the management. We are long-term conservative investors.” Diversification is the key to ADIA’s investment ethos. It invests in all international markets – equities, fixed income, real estate, private equity and alternatives (hedge funds and commodity trading advisers – CTAs).
This multi-asset approach helps to reduce risk. ADIA has one global portfolio, which is then broken down into sub-funds covering a specific asset class. In equities, for example, the specific asset classes include European equities, US equities, Japanese equities, Australian equities, regional small caps and emerging markets equities. In fixed income, the specific asset classes include global government bonds, global investment-grade credit, emerging markets and global inflation-indexed bonds. Cash is another separate asset class.
This segregation of specific asset classes allows for a more specialist approach to investing. Jean-Paul Villain, head of investment strategy, provides the example of inflation-indexed bonds. “We did not want the guys in charge of nominal government bonds to have the flexibility of investing x% in inflation-indexed bonds,” he says. “It’s a proper asset class. It has [its own] drivers.” Each asset class has its own fund managers and in-house analysts covering it. Each has its own benchmark and guidelines. Each is managed through a range of investment strategies and techniques.
In emerging market equities, for example, investments are made on a regional basis but also on a country one for China & India. In addition, some products employ both active and passive investment styles, although the extent to which one style is favoured over the other depends on the specific asset class. Guidelines are tighter for government and inflation-linked bonds, for example, than for emerging markets debt and investment-grade credit.
ADIA manages a global investment portfolio that is diversified across more than two dozen asset classes and sub-categories. You can find out more about ADIA’s investment portfolio here.
ADIA has never published how much it has in assets but estimates have been between $800 billion to approximately $875 billion USD.