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Sovereign Wealth Funds

ADIA long-term returns fall; sovereign wealth fund continues Asia focus

Abu Dhabi, the capital city of the United Airab Em
Abu Dhabi, the capital city of the United Airab Emirates

Abu Dhabi Investment Authority saw 20-year and 30-year annualized rates of return fall in 2016, said the sovereign wealth fund's latest annual review.

Over the 20 years ended Dec. 31, ADIA returned an annualized 6.1%, down from 6.5% at the end of 2015. Over 30 years, the fund returned an annualized 6.9%, compared with 7.5% the previous year.

The sovereign wealth fund does not disclose its assets, but the Sovereign Wealth Fund Institute estimates it has $828 billion.

The review added that, "as in 2015, these figures were impacted by the exclusion of strong returns in the mid-1980s and 1990s from the rolling averages, although ADIA's real rates of return remain consistent with historical levels."

The fund made a number of developments in 2016, including opening an office in Hong Kong, "our first in the territory and a symbol of our long-term commitment to Asia and confidence in its continued growth," wrote Hamed bin Zayed Al Nahyan, managing director at ADIA, in the review. ADIA Hong Kong "serves as a platform for ADIA to broaden and deepen its network of relationships and identify new opportunities in China — where we have invested for more than 25 years — as well as other Asian markets," he added.

The year saw "continued momentum" by the fund's private equities department in increasing exposure to direct deals, alongside its partners, and broadening ADIA's focus in the "rapidly developing Asian private equity markets, particularly in China and India."

Its alternative investments department also launched an emerging opportunities allocation to invest in asset types that fall outside the remit of ADIA's other investment units. The allocation is internally staffed, working with external managers, said a spokesman for ADIA.

The fund also said it continued to build its portfolio of renewable energy infrastructure assets in 2016.

"When viewed as a whole, ADIA ended 2016 on a positive note, with performance underpinned by respectable gains in global markets despite considerable headwinds from political events throughout the year," the review said.

For 2017, ADIA said it expects more than two-thirds of global GDP growth over the next decade to come from emerging economies, with about half coming from China and India alone. "A key challenge for ADIA and other global investors is how to access this growth, and we welcome efforts in many of these countries to improve the openness and functioning of capital markets."