Dubai: The Abu Dhabi Investment Authority (Adia), a UAE sovereign wealth fund, on Monday reported strong gains in its annualised rates of return, driven by a revival in global financial markets and focused investment strategy.
The 2017 annual review of Adia showed that 20-year and 30-year annualised rates of return, in US dollar terms, on its portfolio were 6.5 per cent and 7 per cent, respectively, as of December 31, 2017, up from 6.2 per cent and 6.9 per cent respectively.
Performance is measured based on underlying audited financial data and calculated on a time-weighted basis.
Adia manages $828 billion (Dh3.04 trillion) in assets, according to the Sovereign Wealth Fund Institute.
While favourable conditions in some markets helped to boost the performance of Adia’s global portfolio, the fund’s revised and evolving strategy is focused on long-term performance.
“The wide-ranging initiatives we implemented in 2017 and our ongoing efforts in these areas will ensure that all parts of the organisation remain aligned with our long-term objectives and vision. They will also enhance Adia’s ability to adapt swiftly to opportunities in this era of unprecedented technological change. Since 1976, Adia has invested through the ups and downs of multiple market cycles,” Shaikh Hamed Bin Zayed Al Nahyan, managing director of Adia, said in the annual review.
According to the review, during 2017, Adia was as focused on self-development as it was on external factors. This included the creation of the Strategy and Planning Department (SPD), tasked with implementing an Adia-wide planning process to ensure our activities continue to align with Adia’s mission and long-term objectives.
Leading global equity markets appreciated close to 20 per cent in dollar terms last year. Good returns were widespread across equity markets and credit-sensitive bond markets, with 11 per cent returns in US equities, 22 per cent in Europe and 23 per cent in the Asia-Pacific region.
“With global equity markets having already posted high double-digit returns since 2016, it would appear to be a matter of time before attention reverts to fundamental issues such as record high corporate debt levels, and the sustainability of earnings growth. Potential triggers could be the continued unwinding of monetary stimulus in the US, Europe and China, rising interest rates in the US or UK, or sudden, unexpected geopolitical developments,” Adia’s 2017 review said.
On the fixed income side, US Treasuries returned only about 2 per cent last year But both high yield US debt and global investment grade bonds returned 7.5 per cent as credit performed well and the US dollar depreciated significantly. Adia review observed that fixed-income markets in 2017 were characterised by their stability, with global interest rates, equity and credit spread volatility all at decade-low levels.
As in the past, the steady, low-yielding environment acted as a spur to risk taking, with the main beneficiaries of fund flows being either non-US dollar sectors, such as emerging market local debt, or those offering higher yields such as high-yield US bonds.
“Adia continued to take advantage of cyclically high prices in some areas to selectively sell assets, while seeking out opportunities in overlooked fields with greater potential,” said Shaikh Hamed.