Abu Dhabi SWF Becomes Less Distant

The Abu Dhabi Investment Authority (ADIA), the world’s largest sovereign wealth fund, released its first yearly statement Monday, marking an out-of-character effort to increase transparency.

The decision to release financial statements follows an October 2008 agreement among the world’s SWFs to promote openness by pools of government-held wealth, in which an International Working Group of Sovereign Wealth Funds (IWG) was created to reflect the funds’ investment practices and objectives.

Despite ADIA’s greater openness, it declined to expose its total assets under management, which remains hazy with some estimates reporting a total of less than $400 billion and other figures surpassing $875 billion. 

The SWF’s “annual review” provides a glimpse into the fund’s operations and investment strategy. And its new Web site seeks to make the fund more accessible. Its report provides a breakdown of its portfolio by asset class and region, a description of its approach to investing and risk management, an outline of how ADIA is structured, and overviews of both its governance practices and relationship with the Government of Abu Dhabi, according to a news release on the fund’s Web site. 

 “For more than 30 years, ADIA has been successful in building strong and trusted relationships with governments, regulators and business partners around the world,” said Sheikh Ahmed bin Zayed Al Nahyan, managing director of ADIA, in the statement. “The publication of ADIA’s first annual review and launch of our new website represent another important milestone in this ongoing process.”

The report shows a majority of the fund’s holdings are focused on conventional investments, such as North American and European stocks and bonds. Between 35% and 50% of ADIA’s investment are in North America, and an additional 35% are based in Europe, the report showed. 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. The fund, established in 1976, owns assets ranging from Citigroup bonds and a stake in Gatwick airport to residential property in cities worldwide. 

Looking ahead to 2010, the fund reported that it continues to face “considerable uncertainty” amid a turbulent global economy. “Indeed, the timing and nature of exit strategies, will probably dominate the economic debate and outlook for quite some time… considerable uncertainty remains about the outlook for 2010,” said Nahyan in the review.