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.

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