Abu Dhabi Fund Names New Chief

(April 15, 2010) -- Thirty-nine-year-old Sheikh Hamed bin Zayed al Nahyan will become the new managing director of the Abu Dhabi Investment Authority (ADIA), succeeding his older brother, Sheikh Ahmed bin Zayed Al Nahyan, who died last month in Morocco after his glider crashed into a lake near the capital Rabat. The shift in power is not a surprise, reflecting an effort to keep control of the world's biggest fund in royal hands.

"The announcement further emphasizes the ruling family's role in strategic entities in the emirate," Efraim Chalamish, a SWF expert and global fellow at New York University Law School, said to Reuters. "It is important to keep control not only to manage the fund but also to have a say in key issues impacting the emirate."

Sheikh Hamid's current senior government positions include chairman of Etihad Airways and deputy chairman of the Abu Dhabi Council for Economic Development. He also heads the court of Abu Dhabi's crown prince, who is one of his many half brothers. In that role, Sheikh Hamid acts as an intermediary between the influential crown prince and those looking to do business with him, according to the AP.

The late Sheikh Ahmed, who started as managing director of ADIA in 1997, was ranked No. 27 on Forbes' list of the world's most powerful people last year and successfully shifted the firm’s strategy to increasingly passive from active investment, focusing more on index-tracking funds. About 80% of the fund's assets are managed by external fund managers, while about 60% is invested in index trackers.

ADIA, home to more than 90% of the nation’s oil reserves, has assets of between $300 billion and $800 billion, according to Bloomberg. It employs more than 1,200 people.

Last month, the traditionally secretive fund, which has rarely revealed any details of its investment strategy, became more open when it released a look into its investment portfolio in its first yearly financial statement. The report showed that a majority of the fund’s holdings are focused on conventional investments, such as North American and European stocks and bonds. The report also revealed that as much as 45% of its assets are invested in the developed world. According to ADIA, the fund gained 6.5% annually during the past two decades, despite losses from a $7.5 billion investment in Citigroup and other investments. The fund gained 8% annually over the last 30 years through the end of 2009.

ADIA, established in 1976, owns assets ranging from Citigroup bonds and a stake in Gatwick airport to residential property in cities worldwide.