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Sovereign Wealth Funds

Abu Dhabi Investment Authority’s long-term return inches up

Abu Dhabi Investment Authority, Abu Dhabi saw its long-term returns improve for periods ended Dec. 31, the sovereign wealth fund's 2017 annual review showed.

The fund returned an annualized 6.5% for the 20-year period ended Dec. 31, compared with 6.2% for the 20 years ended Dec. 31, 2016.

The fund's 30-year annualized return was 7% to the end of 2017, compared with 6.9% for the period ended Dec. 31, 2016.

The fund does not disclose assets but is estimated by the Sovereign Wealth Fund Institute to have $828 billion.

"Investors were cheered by another strong performance by financial markets in 2017, while a number of underlying, long-term trends continued to gain in prominence and stimulate debate, including demographic shifts, the impact of technology and climate change," the review stated.

In a statement in the review, Hamed bin Zayed Al Nahyan, managing director at ADIA, wrote: "During 2017, ADIA was as focused on self-development as it was on external factors."

ADIA created a strategy and planning department in 2017, tasked with implementing a planning process to ensure activities continue to align with its mission and long-term objectives. The unit brings together and is responsible for further developing ADIA functions including investment strategy, asset allocation, risk management, research and organizational development.

Also in 2017, the private equities department was reorganized to better support a strategy of investing alongside partners. It moved to regional-focused teams, with an emphasis on building sector expertise in financial services, health care, industrials, technology and consumer. It had been more product-focused, said the review.

Fund executives went through a "thorough review last year of the important reality of climate change and of its potential impact, in order to assess how markets and governments could respond to this impending transition" to renewable technology from fossil fuel-dependence. "The exact paths of this process remain to be seen, but we are excited by the opportunities that are coming into view, and others that are sure to arise, to deploy capital in support of new fields of investment," said the review.

The internal equities department also conducted a study on how big data, machine learning and artificial intelligence are changing investment. "This resulted in the adoption of several initiatives relating to data capture, data storage, stock analysis and factor exposures, which have improved operational efficiencies and will be used to highlight investment opportunities," said the review. The department also improved its use of market information systems, and the way it stores, manages and disseminates proprietary research data, added the review.

The review said externally managed assets were 55% of the total as of Dec. 31, down from 60% a year previous.