Fund profile: Abu Dhabi Investment Authority

Gulf giant takes long look at its long-term investment strategy

The Abu Dhabi Investment Authority, which with an estimated $627 billion in assets is believed to be the largest sovereign wealth fund in the world, reportedly is reviewing its long-term investment strategy.

An ADIA spokesman declined to comment for this article and said officials were not available for an interview.

About 80% of ADIA's assets are externally managed; about 60% of total assets are invested passively, according to investment authority documents.

ADIA officials already have begun making investment changes, including building a “substantial exposure” to inflation-linked bonds (Pensions & Investments, June 15). Chief Investment Officer Jean-Paul Villain said at the time that, unlike other investors seeking to hedge inflation risk with commodity positions, ADIA has to diversify away from its oil-based income stream. Fund officials traditionally have increased exposure to real estate and infrastructure to both diversify and protect against inflation.

In addition, ADIA officials were considering adding U.S. private equity investments (P&I, Dec. 8).

“Any area showing signs of distress is a good place for investors to set their sights,” an unnamed source said late last year. “This does not mean that (ADIA) will forget about Asia or the Middle East or Europe; a well-diversified portfolio means being interested in all regions globally. But at the moment, valuations in the U.S. indicate that there are probably some good companies that can be acquired relatively cheaply.”

Separately, last August, ADIA halved the number of approved hedge funds because executives feared the strategies were too correlated with long-only equity mandates. ADIA has 5% to 10% of total assets in hedge funds. — Drew Carter