Abu Dhabi Investment Authority increases direct investments in 2020

Abu Dhabi Investment Authority deployed more capital than ever before into direct investments, while increasing its private equity and infrastructure allocations during 2020.

The sovereign wealth fund's allocations to private equity and infrastructure increased to between 5% and 10% from between 2% and 8% and to between 2% and 7% from between 1% and 5%, respectively in comparison with 2019.

Direct investments and co-investments represented 55% of overall investments for 2020, up from 45% in 2019, with the balance committed to funds, according to ADIA's review published Wednesday.

In total, ADIA completed 24 direct investments in 2020, up from 18 a year earlier, in addition to investments in early stage companies.

While the investment activity was well distributed across regions, ADIA said it focused on direct investments in China and India where it managed to increase investments significantly for the third consecutive year.

According to its long-term investment strategy, ADIA invests a minimum of 32% of its assets in developed markets equities and a maximum of 42%. The fund also invests between 10% and 20% of its assets each in emerging markets equities and government bonds. The rest of assets are invested among real estate, private equity, infrastructure, other alternative investments and cash. ADIA has estimated assets of about $700 billion.

ADIA said that throughout the 2020 coronavirus crisis it focused on building resilience into both its portfolio and its organization by balancing the need to manage downside risks in periods of volatility and grasping emerging opportunities during times of turbulence.

As of Dec. 31, ADIA's 20-year and 30-year annualized returns were 6% and 7.2% respectively, up from 4.8% and 6.6% in 2019.

Among changes to the geographical spread of ADIA's investments in 2020, ADIA said it also reduced its equity exposure to developed markets Asia to between 5% and 15% from between 10% and 20%. The fund said the decision was consistent with changes to the region's relative weighting in global indexes.

In 2020, ADIA also combined external and internal equity departments. The new structure aims to target markets that are the most attractive from a risk-return perspective, while concentrating its active management capabilities on areas with structural advantages and strong prospects for future growth, the fund said.

Also in 2020, ADIA introduced a climate-change portfolio for passive equities. The fund also expanded its insurance-linked strategies portfolio and removed its internally managed Japanese equities allocation. ADIA said keeping the exposure to Japan through external managers enabled the fund to reallocate resources to other markets that are expected to outperform in the future.

In 2021, ADIA plans to introduce a new externally managed South American equity mandate and said it has identified an existing manager to lead its efforts but did not name the manager.

A spokesman could not be reached to provide further details.