Abu Dhabi sovereign fund ADIA reveals some of its secrets

The managing director of Abu Dhabi’s secretive sovereign wealth fund, the Abu Dhabi Investment Authority, Sheikh Ahmed bin Zayed has given a rare insight into the functioning of this fund in an interview with the German business newspaper Handelsblatt.

ADIA, and its sister fund the Abu Dhabi Investment Council, is reckoned to manage around $450 billion in overseas assets, although Sheikh Ahmed declined to confirm any figure on the size of the fund.

Bouncing back

He said ADIA has reduced its exposure to global stock markets before the crisis in 2008 and benefited considerably from the rebound in markets last year by piling back in at the right moment.

However, there was no comment on ADIA’s $7.5 billion investment in Citigroup in late 2007 which is now the subject of a $4 billion lawsuit, and worth a fraction of this amount.

Sheikh Ahmed cautioned: ‘The world economy is still in a fragile state, and we must not jeopardize its recovery and future economic growth by building barriers to investment and shared success’. His particular concerns are high government deficits, high unemployment and the growing threat of terrorism.

As far as portfolio strategy goes Sheikh Ahmed said ADIA never buys more than 4.9 per cent of a company, and keeps between 40 to 60 per cent of its portfolio in global stocks. Around 15 to 30 per cent is invested in bonds, and US treasuries delivered the best portfolio performance last year.

Geographical diversification

Geographically ADIA has 35 to 50 per cent invested in the USA, and 25-35 per cent in Europe, and the balance spread between Asia and other emerging markets. ADIA does not invest within the UAE.

It is unclear exactly why ADIA spoke to the German business daily at this point. But it could be aimed at countering accusations of secrecy and a lack of transparency at one of the world’s largest investment institutions.

Abu Dhabi has been a big global investor since oil was first discovered in the late 1960s and the accumulation of oil wealth is only outshone by the value of proven oil reserves worth $8.5 trillion at current prices.