Global crisis hits Adia’s long-term returns in 2011

Abu Dhabi Investment Authority, or Adia, which is one of the biggest sovereign wealth funds, said its long-term annualised returns lowered in 2011 due to the economic crisis that made financial markets plunge.

In US dollar terms, the 20-year annualised rates of return for the Adia portfolio slipped to 6.9 per cent against 7.6 per cent in 2010. The 30-year annualised rates of return however, remained unchanged at 8.1 per cent, as of 31 December 2011, says Adia’s annual report for 2011.

ADIA manages a diversified global investment portfolio across more than two dozen asset classes and sub-categories, including quoted equities, fixed income, real estate, private equity, alternatives and infrastructure, the annual report said.

“2011 was a year in which financial markets and global economies once again proved their resilience in the face of powerful headwinds,” its chairman and managing director Shaikh Hamed bin Zayed Al Nahyan said in the review.

Approximately 80 per cent of Adia’s assets are managed by external fund managers and 60 per cent of its assets are invested in index replicating strategies. The investment authority aims to keep 35 to 50 per cent of its holdings in North America, and another 25 to 35 per cent in Europe.

Shaikh Hamed said: “despite many twists and turns, the global economy continued its recovery last year.”

Looking forward, the Adia chief said “despite facing undoubted short-term risks, the global economy offers many exciting and important opportunities.”

“Economic advances require the input of capital through a range of vehicles, from private equity and direct investments to public equities, hedge funds and also government bonds,” the managing director said.

“As a long-term investor, we see ourselves and others with similar investment horizons as providers of this necessary capital, with the advantage of patience and the ability to ride out dips in the economic cycle,” he said.

Despite the subdued market conditions, Adia said its infrastructure division concluded a number of new investments. Among these, an Adia subsidiary was part of a consortium that agreed to acquire a 24.1 per cent stake in Gassled-Norway’s gas transmission pipeline system.

In listed equities, the Adia in May acquired through a subsidiary slightly more than five per cent of MAp Airports now known as Sydney Airport Holdings Ltd, an Australian company that owns stakes in the Sydney, Brussels and Copenhagen airports.

The US-based Sovereign Wealth Fund Institute ranks Adia as the largest SWF, with assets under management of $627 billion. That puts it ahead of government funds in Norway, China and Saudi Arabia.