Abu Dhabi Fund Names New Chief

Sheikh Hamed bin Zayed al Nahyan will become the new boss of Abu Dhabi's SWF, replacing his late brother who died in a glider crash in a lake in Morocco.

(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.

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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.



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

Study: Teacher Pension Funds Are Short Billions

A new study found that all 59 funds that cover most teachers face shortfalls, placing a burden on taxpayers to pay nearly three times as much as the funds say they need to balance the books.

(April 14, 2010) — According to a new study, taxpayers nationwide owe public school teacher retirement accounts about $933 billion, nearly triple the amount reported by the plans. The researchers attribute $116 billion of the shortfall to havoc in the stock market.

“States are already caving under the pressures of the recession and this is bad news for governors and state legislatures,” said Robert Enlow, president and CEO of the Foundation for Educational Choice, in a press release. “Every dollar in the red ink column for pensions is one less dollar that is used to educate children.”

The report by the Manhattan Institute for Policy Research, which covered 59 plans for 13 million working and retired educators, is the third study in less than two months to suggest that pension costs of about $1 trillion may overwhelm state and local budgets hurt by falling tax revenue.

According to the study, five plans are 75% funded or better: teacher-dedicated plans in the District of Columbia, New York State and Washington State and state employee retirement systems in North Carolina and Tennessee that include teachers. The worst was West Virginia’s at 31% funded, along with the California’s State Teachers’ Retirement System (CalSTRS), with a $97.5 billion shortfall.

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“This report makes clear that it will be even more difficult than previously thought for states and school districts to honor pension benefit promises to teachers—without putting actual classroom services at risk” says Howard Husock, vice president of policy research at the Manhattan Institute. “Taxpayers and beneficiaries alike need to know the extent of these unfunded liabilities, however—and this report is an important contribution to that understanding.”

Previously, a study by the Stanford Institute for Economic Policy Research (SIEPR) found that the three largest Californian pension funds face a funding shortfall of more than half a trillion dollars, nearly eight times larger than what public employee retirement funds previously estimated and more than six times the value of the state’s outstanding bonds.



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

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