ADIA at 40: A story of vision, sophistication and success

The Abu Dhabi Investment Authority (Adia) today marks the 40th anniversary of its creation, with Sheikh Hamed bin Zayed Al Nahyan, Adia’s Managing Director, releasing an open letter charting the fund’s growth and reflecting on its role as Abu Dhabi’s store of wealth for future generations.

“Over the course of the past four decades, Adia has evolved from a small operation using shared office space to become one of the world’s largest and most sophisticated investment institutions. It has achieved this while always remaining true to its mission and by forging its own path – one that was right for Adia – and not simply following the route taken by others,” said Sheikh Hamed.

In a wide-ranging letter, Sheikh Hamed noted the vision of Adia’s founders, in particular the late Sheikh Zayed, Founding Father of the UAE, and Sheikh Khalifa, President of the UAE and the current Adia Chairman.

“In choosing to create an independent institution, whose investment decisions would be based solely on economic considerations, and through the clarity of its mission, Adia’s founding fathers created the conditions that have underpinned our success for the past 40 years.”

Over recent years, Adia has continued to grow and develop, bolstering its internal capabilities and managing more assets in-house, rather than through external managers.

It has also played a leading role in improving understanding of the role that sovereign wealth funds (SWFs) as a whole play in promoting the free flow of global capital and investments.

In 2008, Adia was elected as the co-Chair, alongside the IMF, of a working group representing funds from 26 countries. This led to the creation of the Santiago Principles, a set of practices and principles that clearly lay out the investment practices and objectives of SWFs who sign up to them.

In his letter, Sheikh Hamed struck a reassuring tone about the impact of oil price declines on the fund’s investment strategy.

Noting that Adia has witnessed much in its history, from market booms to steep declines, and wide swings in commodity prices, Sheikh Hamed said the fund’s responsibility was to “navigate with a steady hand through all market conditions, never losing sight of the horizon”.

“This ensures we are able to fulfil our obligations at all times, without compromising our long-term investment goals or reputation in the market,” he said.

Other Middle East oil-based funds have dipped into the reserves they manage for their governments to help plug deficits that have widened by lower oil prices.

The rating agency Fitch said last month the Abu Dhabi Government may issue bonds to help to address the issue of low oil prices. Over the past year and a half, oil prices have tumbled about 60 per cent.

While not commenting specifically on withdrawals, Sheikh Hamed described market downturns as an inevitable part of every cycle. It is not a cause for panic, rather an opportunity for patient investors, he said.

“This can be seen through Adia’s proven track record in generating steady returns over the decades, irrespective of market conditions,” he said.

“I firmly believe that Adia’s role today has never been more relevant. By remaining disciplined, and by drawing on the knowledge and experience built over 40 years, we will ensure that Abu Dhabi continues to prosper.”

Top financial executives on Adia:

Laurence D Fink, chairman and chief executive, BlackRock

“BlackRock has worked in close partnership with Adia over many years and we value the opportunity we have had to work with the fund as it has grown, not just in size, but in stature and reputation. Adia is amongst the most highly regarded and disciplined participants in the international financial markets and has rightly earned its reputation as a stable, long term investor. BlackRock congratulates Adia on reaching this impressive milestone, and wishes them many more years of continued success.”

Jamie Dimon, chairman and chief executive, JP Morgan

“Adia is one of the world’s premier funds. JP Morgan has had a deep relationship with Adia and we’ve turned to them with some of our most important investment opportunities because of the fund’s stability and long-term focus. They are one of the partners we count on as we continue to grow our business in the UAE.”

Jean Lemierre, chairman, BNP Paribas

“For four decades, the Abu Dhabi Investment Authority have built upon excellence by offering a stable and disciplined approach to long term investment strategies. This, in turn, has led to the careful and prudent development of Abu Dhabi’s assets. I extend my warmest congratulations, on behalf of BNP Paribas, to all those, past and present, who have guided, shaped and sustained Adia in its evolution to become one of the world’s largest investment funds. We are proud to have been able to support their achievements and we wish the Adia team continued success.”

ADIA Timeline

1967: Creation of Abu Dhabi's "Financial Investments

Board” under the Department of Finance (mandate given to UBS, Robert Fleming, Morgan Guaranty Trust, and Indosuez).

1976: Decision to separate ADIA from the Government of Abu Dhabi as an independent organisation.

Created the following departments: Equities & Bonds, Treasury, Finance & Administration, Real Estate, Local & Arab Investments.

1986: Started investing in alternative strategies.

1987: Equities and Bonds departments became regional (North America, Europe and Far East).

1988: Number of employees exceeded 500 mark.

1989: Started investing in private equity.

1993: Started formal asset allocation process with a set of benchmarks and guidelines. Bonds moved from Equities Department to Treasury Department.

1997: Creation of the global Private Equities Department.

1998: Started investing in inflation-indexed bonds.

2005: Added a dedicated allocation to small caps within Equities, and investment-grade credit within Fixed income.

2007: Started investing in infrastructure sector. Moved into new headquarters.

2008: Participated in the development of policy principles for international investments with the U.S. Department of the Treasury.

Appointed co-Chair with the IMF of the International Working Group of Sovereign Wealth Funds.

2009: Creation of Investment Services Department. Became founding member of the International Forum of Sovereign Wealth Funds (IF').

2011: Creation of Indexed Funds Department and External Equities Department. Combined real estate and infrastructure operations to create Real Estate & Infrastructure Department.

2012: Creation of three new departments — Human Resources — Central Dealing — General Services. Launched Year One Graduate Programme, which aims to provide our UAE National recruits with key workplace skills, hands-on training, and experience across all asset classes.

2013: Reorganised Accounts Department. Restructured IT Department.

2014: Design of a new operating model for investment departments, to increase flexibility to target alpha opportunities. Two new mandates added in Internal Equities Department, and new organisational design for Infrastructure Division. Inaugural Global Investment Forum held in November, a two-day event to stimulate cross-departmental sharing of insights and experience.

mkassem@thenational.ae