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Abu Dhabi’s Sovereign Wealth Giant Shifts Gears

Sheikh Hamed bin Zayed Al Nahyan, ADIA's Managing Director

Sheikh Hamed bin Zayed Al Nahyan, ADIA’s Managing Director

The Abu Dhabi Investment Authority (ADIA) achieved significant breakthroughs for 2012. Annualized returns for 2012, 20-year return (percent annualized) were 7.6%. For 2011, the 20-year return was 6.9%. A positive performance for 2012, ADIA profited from a hard weight in public equities, akin to Norway’s GPFG gain in asset value. Achieved significant breakthroughs in 2012 include the movement toward in-house management in alternatives and a shift to emerging markets.

ADIA’s Investment in Human Capital
Globally, elephantine public investors constantly seek ways to minimize fees, hence the increased interest of in-house investment management. Private equity, real estate and infrastructure are growing assets classes for ADIA given the low-yield environment. These alternative asset classes are costlier to access compared to bonds or public equities. One way to lower fees in alternatives is to take a direct approach to investing.

ADIA has committed substantial resources to recruit industry professionals to Abu Dhabi.

Our estimate of US$627 billion for the asset size of ADIA relates to the employee size of the organization. In 2012, there were around 1,400 employees working for ADIA from 1,275 in 2011. Approximately 75% of assets are managed by external managers – a decreasing percentage from previous years. In 2011, 80% of assets were managed externally. Abu Dhabi’s sovereign wealth fund has taken steps; they have built up capabilities in their internal equities team.

ADIA has worked aggressively to attract talent to Abu Dhabi, paying compensation above what other Western sovereign wealth funds and pensions pay. Other Gulf state-owned investors like the Qatar Investment Authority are following a similar route by enhancing their investment teams to purchase assets or companies directly, rather through funds.

Notable ADIA hires include Marc Keirstead as chief financial officer of ADIA’s private equity department. He came onboard in October 2012 from the Canada Pension Plan Investment Board. Another key hire was John McCarthy who serves as ADIA’s global head of infrastructure. John McCarthy joins ADIA from Deutsche Bank where he was managing director and global head of RREEF Infrastructure since 2005.

ADIA not only focuses on recruiting overseas talent, they aim to beef up talent within their nation. ADIA launched “Year One Academy” which aims to provide UAE nationals opportunities to receive training and experience in all asset classes at ADIA.

Shift to Emerging Markets[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

UNICEF and NBIM to Host Meetings on Children’s Human Rights

The United Nations Children’s Fund (UNICEF), a United Nations programme headquartered in New York City, has partnered with Norges Bank Investment Management (NBIM) to facilitate a series of meetings between companies to discuss issues surrounding children’s human rights.

According to the news release, “the network will facilitate dialogue between leading brands and retailers in the garment and footwear industry to strengthen children’s rights.”

NBIM is invested in many listed companies and have invited them to join a network to tackle these issues. Over the next two years, the organizations plan to hold three workshops as well as quarterly meetings surrounding these issues.

“Over time, we hope and expect that the network will contribute to improved market practices among companies and greater respect for children’s rights,” says Carine Smith Ihenacho, Global Head of Ownership Strategies, in a NBIM press release.

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SouthGobi’s CEO Arrested, CIC Struggles with Investment

The China Investment Corporation (CIC) has long struggled with its investments in coal assets, specifically in globally-listed coal miner SouthGobi Resources Ltd, which operates its flagship coal mine in Mongolia. In November 2009, CIC and SouthGobi Resources inked a convertible debenture deal. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Qatar Central Bank Deals with MSCI

MSCI, a stock index company whose benchmarks influence investor behavior, has tremendous indirect power impacting the stock markets of smaller economies. In 1988, MSCI released its emerging markets index, a now-widely-used benchmark for many institutional investors wanting access to growth markets. China and South Korea make up the majority of the benchmark, but smaller economies such as Poland, Chile and even Qatar make up other pieces of it.

[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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