Abu Dhabi’s largest sovereign wealth fund brought more investment management in-house in 2023, increased its proportion of passively managed assets, and upped its strategic allocation to private equity.
Abu Dhabi Investment Authority, which has about $1 trillion in assets according to estimates by data providers, boosted its internally managed assets to 64%, up from 55% in 2022, according to its annual review published Nov. 14.
Managing Director Hamed bin Zayed Al Nahyan said in the review that the increase “can be mostly attributed to changes in how ADIA manages parts of its indexed equity exposures through the core portfolio department, which has substantially expanded its internal capabilities in recent years.”
That increase allows ADIA the flexibility to implement asset allocation decisions more efficiently, he said. “In parallel, ADIA is continuing to expand and deepen relationships with leading external managers across various asset classes,” he added.
The wealth fund also discloses its long-term performance, which was an annualized 6.4% over the 20 years ended Dec. 31, vs. 7.1% for the same period ended Dec. 31, 2022. The 30-year annualized return was 6.8% as of Dec. 31, vs. 7% for the 30 years ended Dec. 31, 2022.
The active/passive split of assets was 54% to 46% — a change from the 58% to 42% relationship in 2022.
The sovereign wealth fund, which discloses long-term strategic portfolio asset allocations, rather than specific exposures, made changes only to the target range for private equity, which increased to a 12% to 17% proportion of the portfolio, up from a 10% to 15% range in 2022.
The private equity department skewed its private equity commitments more toward direct investments in 2023 vs. to funds, “driven by increasing participation in large take-private transactions. Its allocation to platform opportunities also increased as a percentage of the total, while secondaries remained a key theme,” the review said.
The private equity department completed more than 20 direct investments of more than $150 million, which it said was broadly in line with 2022.
The fund employed 1,310 people as of Dec. 31, down slightly from 1,380 as of Dec. 31, 2022.
The wealth fund is increasing its exposure at a total portfolio level to asset classes where “it holds natural competitive advantages,” such as private assets, where the fund’s “long-term focus and resilience to market cycles enables it to capture opportunities during market dislocations,” he added.
Elsewhere, the energy transition remained a priority for ADIA in 2023, with the wealth fund bringing together academics, investors and corporations for the ADIA Energy Transition Summit in Abu Dhabi.
“The event showcased diverse perspectives on the challenges and opportunities of transitioning to a low-carbon global economy. The insights from these discussions are now being transformed into investable ideas,” the review said.
Investing in the digital age remained a theme, which ADIA said “requires new capabilities.”
ADIA has been accelerating its systematic, science-based approach to investing, with a 100-strong quantitative research and development team “playing a pivotal role in evolving ADIA’s asset allocation process, making it increasingly responsive to fast-moving opportunities.” The fund has deepened its data analytics and quantitative investment capabilities, particularly in the core portfolio and fixed-income departments, “while deploying new tools to analyze and derive insights from data.”
ADIA also invests in the next generation of talent, it said, and last year partnered with Khalifa University in Abu Dhabi to jointly develop a master’s program in computational data science. “The program aims to help professionals develop the skills required to make well-informed decisions through the effective use of data,” the review said.
The wealth fund also collaborated with Sorbonne University in Abu Dhabi for a certificate in applied mathematics for finance, designed specifically for ADIA employees who plan on pursuing a master’s degree in data science and AI. “By pursuing learning as a core skillset, ADIA is positioning its people to succeed in what is likely to become an increasingly dynamic investing landscape,” ADIA added.