Global volatility lowers Abu Dhabi Investment Authority’s returns

The Abu Dhabi Investment Authority (Adia) recorded a fall in long-term returns last year amid volatility in global financial markets.

Investments generated returns of 6.9 per cent at the end of 2011, compared to 7.6 per cent a year earlier, measured in dollars over 20 years. The fund does not disclose annual performance.

"The distinction between the developed and emerging economies is fading faster than many had imagined," said Hamed bin Zayed Al Nahyan, managing director of Adia, in its annual review published today. "The clearest sign of this is the contrast between widespread downgrades in the credit ratings of developed economies and the continued strengthening of many emerging countries."

Adia has grown to become one of the world's largest sovereign wealth funds since its creation in 1976 with a mission to invest on behalf of the Government of Abu Dhabi, focusing on long-term value creation.

While it does not disclose the value of its assets, research organisations such as the Petersen Institute for International Economics and the Sovereign Wealth Fund Institute rank it as the world's largest state-owned investment vehicle with estimated holdings worth more than $620 billion.

Adia restructured several departments last year as its workforce grew to 1,275. That included combining its real estate and infrastructure activities into one department. At the same it merged four geographically-focused external equities departments into two units - the Indexed Funds Department and the External Equities Department.

Global sovereign wealth funds (SWF's) controlled about $4 trillion in assets in March 2011, up from $3.6 million in 2010, according to PriceWaterhouseCoppers (PWC), the consultancy.

Some of the world's largest SWF's are to be found in the Middle East, where governments spend money earned from oil and gas exports on long-term investments.

But the emergence of large Asian funds in recent years is fast changing the landscape, analysts say.

"Commodity-based funds, centred largely in the Middle East, are being challenged for ascendency by funds which are financed from trade or fiscal surpluses," said the Impact of Sovereign Wealth Funds on Economic Success report from PwC. "Whilst Singapore has been saving in this type of fund since the early 1980s, the establishment of a number of funds in China and elsewhere mean that non-commodity funds now account for around 40 per cent."

Adia started publishing some performance figures two years ago.

The move followed its appointment as co-chair with the International Monetary Fund of the International Working Group of Sovereign Wealth Funds in 2008.