Abu Dhabi Investment Authority Is Reducing Developed World Holdings

One of the largest sovereign bonds in the world, Abu Dhabi Investment Authority is reducing its current holdings in the developed world shares in favor of the emerging market assets. Currently, the fund counts on the external investors to manage around 75% of the total assets, down from the value of 80% which was the case in 2011. This was announced through the annual report published for 2012, released on today. Abu Dhabi Investment Authority, more popular by its abbreviation ADIA, reported that 55% of total assets are invested in its index replicating strategies, down from 60%. This is expected to boost investment of the company in the alternative assets.

Abu Dhabi, which is the capital of the United Arab Emirates, is home to around 6% of the total proven oil reserves in the world. Abu Dhabi is currently trying to diversify from the crude exports with investments abroad. The value of the assets is not disclosed by the wealth fund which is currently building up various in-house teams for sectors like real estate and private equity as it is looking forward to have higher control over investments.

The fund led by the Managing Director of the same, Sheikh Hamed bin Zayed Al Nahyan, also cut the target range for the developed world equities in the portfolio to 32% to 42%, less than what it was a year ago (35% to 45%). However, just like 2011, it is expecting to invest 10% to 20% of assets in the emerging market equities.

Over the last 2 decades, ADIA has been able to generate annualized returns of 7.6% and the same is 8.2% over the last 30 years, as mentioned in the report. Not only the developed and emerging market equities, the fund invests in various small cap equities, hedge funds, infrastructure and private equity as well.

The overall allocation made in the Chinese equities was also boosted by ADIA in 2012 after it received an approval from the market regulator under the Qualified Foreign Institutional Investor scheme. The holding was increased to $500 million from its earlier limit of $200 million in the 3rd quarter, as announced by the company.

Yuan is rapidly progressing towards becoming an international currency and this must offer more opportunities to the global investors in the next few years, as mentioned in the report by ADIA.

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