Abu Dhabi Investment Authority's 20-year and 30-year annualized rates of return declined slightly in 2022, according to the sovereign wealth fund's latest annual review issued Oct. 10.
ADIA returned an annualized 7.1% for the 20 years ended Dec. 31, down from 7.3% for the 20 years ended Dec. 31, 2021. Over 30 years, the sovereign wealth fund returned an annualized 7% as of Dec. 31, compared with 7.3% for the 30 years ended Dec. 31, 2021.
ADIA does not disclose its assets, but the Sovereign Wealth Fund Institute estimates it has about $853 billion.
"The dominant theme of 2022 was the return of inflation, after more than a decade of stagnant or declining prices," said Hamed bin Zayed Al Nahyan, ADIA's managing director, in a letter included with the review. "In addition to pent-up demand following the global pandemic, energy prices and supply chain dislocations further accelerated the trend."
Against this backdrop, Al Nahyan wrote, ADIA's efforts in recent years "to increase its investing flexibility and operational agility paid dividends, enabling it to make swift portfolio adjustments as market conditions evolved during 2022."
ADIA was also "successful in capturing pockets of absolute return across asset classes, underlining the value of its diversified portfolio in a year where equities and bonds experienced an atypical correlation," he added.
Looking at 2023, Al Nahyan said financial markets "will likely remain vulnerable to a range of external influences. These include the trajectory of global growth and inflation, the possible negative consequences of monetary tightening on financial institutions, and ongoing geopolitical risks."
He added that "it is clear that the era of low inflation and cheap money that propelled risk assets higher following the global financial crisis has drawn to a close. Investors will now be required to navigate a less benign landscape marked by higher inflation and borrowing costs."
The new economic landscape, he added, may also "increase the appeal of physical assets and alternative approaches that are better suited to managing inflation risk."
The annual review also noted that as of the end of 2022, 55% of the sovereign wealth fund's assets were managed internally and 45% externally. The corresponding figures for the end of 2021 were 54% and 46%, respectively, a spokesperson said.
Also, as of Dec. 31, 58% of assets were actively managed and 42% were passively managed. The spokesperson added that the figures for end of 2021 were the same.
