Dubai: The Abu Dhabi Investment Authority (Adia) topped the list of the world's sovereign wealth funds (SWFs) with an estimated $627 billion (Dh2.303 trillion) of assets, according to the latest ranking by the US-based Sovereign Wealth Fund Institute (SWFI).

SWFs from the UAE, China, Norway and Saudi Arabia are in the top four places. While China's main sovereign fund, SAFE Investment Company, was ranked second, with $567.9 billion in assets, Norway's government pension fund came in third with $560 billion.

Established in 1976, Adia's main funding source is the financial surplus from oil exports, according to SWFI's website.

Adia replaced the Financial Investments Board created in 1967, part of the then Abu Dhabi Ministry of Finance. It is wholly owned and subject to supervision by the Government of Abu Dhabi.

The fund has an indep-endent legal identity with full capacity to act in fulfilling its statutory mandate. As much as 80 per cent of its assets are administered by external managers, which include around 60 per cent that is passively managed through tracking indexed funds.

Main funding source

Adia's funding sources derive from oil, specifically from the Abu Dhabi National Oil Company (Adnoc) and its subsidiaries which pay a dividend to help fund Adia and its sister fund Abu Dhabi Investment Council (Adic), according to SWFI.

These payments are on a periodic basis if the Government runs a surplus to its budgetary requirements and other funding commitments. According to SWFI, about 70 per cent of any budget surplus is sent to Adia, while the other 30 per cent of surplus goes to the Adic.

Last September, in its annual review, Adia said that at the end of 2010, in US dollar terms, the 20-year and 30-year annualised rates of return for the Adia portfolio were 7.6 per cent and and 8.1 per cent respectively. This compares to 20-year and 30-year annual returns of 6.5 per cent and eight per cent respectively at the end of 2009, Adia said.

In its last annual review, the Fund said that 35 to 45 per cent of its portfolio was invested in developed equities while 10 to 20 per cent is in emerging market stocks and up to 20 per cent in government bonds.