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Tue 13 Sep 2011 08:11 AM

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Abu Dhabi wealth fund wary on global economic growth

Abu Dhabi Investment Authority improved its long-term returns in 2010, annual review shows

Abu Dhabi wealth fund wary on global economic growth
Abu Dhabi Investment Authority is one of the world’s biggest sovereign wealth funds

The Abu Dhabi Investment Authority, one of the world’s biggest sovereign wealth funds, improved long-term returns in 2010 as the global economy recovered.

ADIA has a 20-year annual rate of return of 7.6 percent, and a 30-year rate of return of 8.1 percent as of the end of last year, the fund said in its annual review published on Tuesday. This compares to 20-year and 30-year annual returns of 6.5 percent and 8 percent respectively at the end of 2009. The fund didn’t give a return for last year.

“2010 was a year of considerable volatility, but one that ultimately delivered favorable economic and market outcomes,” Managing Director Hamed bin Zayed Al Nehayan said in the review. An “expanded global marketplace will provide a positive investment climate as it drives new discoveries in life sciences, alternative energy and other emerging technologies.”

Abu Dhabi, capital of the United Arab Emirates and home to about 7 percent of the world’s proven oil reserves, is trying to diversify away from oil by investing globally. ADIA and its Norwegian and Chinese peers are the three largest sovereign wealth funds in the world, managing more than $1 trillion among them, London-based research firm Preqin Ltd. said in March 2010.

The authority benefited last year from a decision in 2009 to tilt holdings toward asset classes and regions helped by better growth prospects, it said. In 2010, ADIA also added actively managed Latin America and India portfolios to its equities department, it said.

The global economy expanded 5.1 percent in 2010 after contracting by 0.5 percent in 2009, according to estimates from the International Monetary Fund. The Standard & Poor’s 500 share index gained 12.8 percent in 2010 as the U.S. economy grew 2.9 percent from a 2.6 percent contraction in 2009, the IMF said.

ADIA’s report doesn’t disclose the value of its assets, although it provided a breakdown of its holdings by asset class and regions. As much as 45 percent of its assets were invested in developed equity markets, between 10 percent to 20 percent in government bonds, as much as 10 percent is dedicated to real estate, credit and so-called alternative assets such as hedge funds and managed funds, according to the report.

ADIA said it expects “global economic growth to remain hesitant in the near term as governments in major developed markets begin the sensitive task of cutting potentially burdensome debt levels without undermining growth.” Returns from equity markets though will gradually revert closer to their long-term historical average of 6 percent to 8 percent, the ADIA said in the review.

Abu Dhabi, the biggest of seven emirates in the UAE, set up ADIA in 1976 to manage proceeds from its oil wealth. ADIA doesn’t invest in the UAE or typically in the Gulf Arab region. ADIA had assets valued at $328bn at the end of 2008, according to economists at the New York-based Council on Foreign Relations.


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