Abu Dhabi Investment Authority (ADIA) is targeting China and India for future growth, it said in its annual report on Wednesday.
The UAE’s biggest sovereign wealth fund said its long-term returns declined over the past year amid market volatility and slowing global economic growth.
In US dollar terms, ADIA said the 20-year annualised rate of return on its portfolio fell to 6.5 percent in 2015 from 7.4 percent the year before. The 30-year rate of return slipped to 7.5 percent from 8.4 percent, it said.
Despite the challenges, ADIA said, it will remain focussed on emerging economies for long-term growth, in particular, China and India.
The fund’s managing director, Sheikh Hamed bin Zayed Al Nahyan, wrote in the report’s outlook chapter: “Those emerging economies that are positioned more as commodity consumers are better placed to grow in the years ahead.
“China and India dominate this group, of course, and both offer promise based on evident efforts to reform.
“China is making great strides in integrating its capital markets into global markets, and there are optimistic signs that India is seeking to open its markets to trade and outside investment.
“In both cases these are processes, not events, and we look forward to continued progress on these fronts and offering our support wherever possible.”
Al Nahyan noted that emerging economies are making “impressive progress” in several fields, most notably, in reducing poverty – the global population in poverty fell below one billion people in 2012 and is expected to have declined further to around 700 million last year, according to the World Bank – and implementing “digital transformation”; that is, using technology to broaden opportunity and lift living standards, he wrote.
Emerging markets are also making progress on developing alternative sources of energy – trends that “hold the potential for more interesting opportunities to invest”.
However, investors will have to work harder in an economic climate of lower returns and higher volatility.
He concluded: “Against a backdrop of slowing global growth, ADIA’s investment strategy will remain focused on identifying long-term trends and patiently growing capital.”
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