ADIA Review reveals views, not value

However, ADIA’s bid for openness, “underlining ADIA’s commitment to and compliance with the Santiago Principles” of SWF openness, fell short of actually disclosing the value of its holdings, either in total, or in individual areas. It did reveal, though, a decidedly conservative investment bias, with close to 45% of its assets invested in developed-market equities.

“For more than 30 years, ADIA has been successful in building strong and trusted relationships with governments, regulators and business partners around the world,” said Sheikh Ahmed bin Zayed al Nehayan, MD of ADIA. “The publication of ADIA’s first annual review and launch of our new website represent another important milestone in this ongoing process.”

ADIA’s holdings are estimated at between $627 billion and $875 billion, putting it above Norway’s $445 billion Government Pension Fund (GPF), Saudi Arabia’s $431 billion SAMA Foreign Holdings, and China’s $347 billion SAFE Investment Company. The Review highlights ADIA’s participation as a leader in the SWF community. “In 2008, ADIA reached an understanding with the US Department of the Treasury and the Government of Singapore Investment Corporation that laid out policy principles and standards for investments,” it states, emphasizing ADIA’s formative role in drafting the Santiago Principles.

The SWF takes pains to emphasize its independence from the government of Abu Dhabi. “ADIA carries out its investment programme independently and without reference to the Government,” the Review states. “ADIA is not involved with nor has any visibility on matters relating to the spending requirements of the Government of the Emirate of Abu Dhabi, nor are ADIA’s assets classified as international reserves.”

As an investor, ADIA allocates conservatively, with 35-45% of its portfolio in developed-market equities, according to the Review, and a further 10-20% in government bonds. ADIA's allocations dictate a 10-20% range for developed Asia and a 15-25% allocation to emerging markets. According to the Review, ADIA commits 80% of its portfolio to external managers, and some 60% to index-tracking strategies. The Review also claimed a 30-year 8% rate of return for ADIA as at end 2009.

In ADIA’s total holdings, private equity is allocated as only a 2-8% range – which still could amount to as much as $70 billion. Its commitment to “alternatives” – defined as hedge funds and managed funds – covers a further 5-10% range of its total assets. Real estate has a further 5-10% allocation, and infrastructure a 1-5% range.

 ADIA did emphasize “our decision to begin investing in alternatives as early as 1986 and in private equity in 1989” as an indicator of the SWF’s flexibility and openness to new developments. However, an ADIA spokesperson declined to confirm to AVCJ whether the current allocation might increase in future.

As for how ADIA assesses its private equity investments, the Review explains, “We closely monitor performance and measure it against two benchmarks, the first of which
analyses returns against a group of peers over a trailing six-year period, while the second aims to outperform the quoted equity market over 10 years.”

Some AVCJ sources describe the Review as essentially an attempt to satisfy the Santiago Principles. Others welcome it for just that reason. “This is an organization that was so private that until recently they effectively didn’t even have a website,” said one.

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• Topics
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