Abu Dhabi Investment Authority, Abu Dhabi, is exploring opportunities for investment in Africa and continues to view China and India as key drivers of global growth.
The sovereign wealth fund's 2019 review, published Tuesday, highlighted among its key developments that it hosted an Africa Investment Summit "to explore opportunities on the continent for long-term focused investors."
In a letter published as part of the review, Hamed bin Zayed Al Nahyan, managing director, said: "With an abundance of natural resources and young, growing and increasingly educated populations, African countries are among those offering the greatest potential for long-term investors."
He highlighted that investment in Africa "comes with many challenges, which must be carefully weighed. However, we are monitoring developments closely and increasing our dialogue with potential local partners, with a view to accessing appropriate opportunities on the continent."
Mr. bin Zayed Al Nahyan added that, on a geographic basis, fund executives "continue to see China and India as key drivers of global growth in the years to come, although we recognize the importance of remaining open-minded about possible new sources of return."
The fund's 20-year annualized rate of return at Dec. 31 was 4.8%, vs. 5.4% in 2018. The 30-year annualized rate of return was 6.6% as of Dec. 31, vs. 6.5% last year. "The 20-year rate of return in particular was negatively impacted by the exclusion from the rolling average of strong gains in the late 1990s," the review said.
ADIA's long-term strategy portfolio remained unchanged vs. last year, with a 32% to 42% allocation to developed equities, 10% to 20% allocations each to emerging markets equities and to government bonds, 5% to 10% exposures each to credit, alternatives and real estate, a 2% to 8% allocation to private equity, 1% to 5% exposures each to small-cap equities and infrastructure, and a zero to 10% allocation to cash.
The fund is 55% actively managed, while 45% of assets are run internally — both unchanged from last year.
By region, the long-term strategy portfolio had a 35% to 50% exposure to North America, 20% to 35% to Europe, 15% to 25% to emerging markets and 10% to 20% to developed Asia. Allocations were unchanged from 2018.
For its outlook, ADIA said the long-term implications of the COVID-19 outbreak remain unclear, although the financial system is more robust than in 2008's global financial crisis "and more able to withstand a global slowdown."
The fund's external equities department "is planning to add Mexico to its group of single country mandates and has identified a reputable manager to lead its efforts in capturing local opportunities," the review said. The department will also fund a new strategy targeting "modestly lower expected excess returns over time, with lower risk — an approach aimed at further enhancing (the department's) ability to generate consistent long-term dollar alpha for the total ADIA portfolio," the review said.
In real estate, executives will continue to focus on emerging markets in the coming years, particularly China, India and Latin America. "The growing consumer class in these markets, combined with a scarcity of quality space across sub-sectors, is likely to provide a range of attractive opportunities," the review said.
Mr. bin Zayed Al Nahyan added in his letter that, looking ahead, "advances in technology are likely to bring the greatest changes to the investment industry in the decade to come. The recent evolution in computational power has enabled machine learning techniques to tackle new problems of increased complexity, and this knowledge is now widely accessible through open source platforms."
This impacts on investors in many ways, including that investee companies "are at risk of obsolescence if they do not adapt to this new reality," he said.
ADIA has an estimated $579 billion in assets, according to Fitch Ratings.