Adia seeks portfolio diversity in emerging markets

Fund looking strongly at long-term strategy

The emerging markets department of the Abu Dhabi Investment Authority (Adia), the world’s largest sovereign wealth fund, favours assets that will fetch it high and stable earnings in the long term, a department official has said.

Saeed Al Hajeri, Executive Director of Adia's Emerging Markets Department, which also oversees investments in infrastructure assets, said that his focus within infrastructure is on assets with long-term stable yields, such as airports, power stations and gas pipelines.

In an interview with the US-based CFA Institute magazine, Hajeri said Adia's emerging markets department is seeking to diversify its portfolio of infrastructure assets across regions, including North America, Europe, Australia and the Far East.

“So we try to divide the portfolio between these three regions. On top of that we also look at diversity of sectors or assets….the types of assets that fit into this include airports, highways, hospitals, power stations, and gas pipelines,” he said in the five-page interview published by Adia's website last week.

“Our focus is really long-term assets with long-term stable yield, usually high-yield assets with good cash flow, stable cash flow, not the risky type of infrastructure more like the structure of a bond rather than the structure of private equity. We are also minority investors and don’t seek to operate the assets we invest in.”

He was asked how Adia views investment in such regions as the West and the Middle East.

“It’s always dangerous to generalise, but, broadly speaking, the West brings a certain data-based, structured discipline and a sense of urgency to make decisions and achieve results,” he said.

“The Middle Eastern approach tends to be more long term and holistic, with an emphasis on relationships and an overriding sense of what is sustainable and good for the overall community.

But both are essential in making Adia what it is today.”

Hajeri said Adia, believed to be in control of between $400 and $900 billion in foreign assets, is becoming more open to the public as part of its new transparency policy.

He said the 40-year-old fund had been “naïve” by thinking “why people want to know about Adia”.

“But we have recognized that as a responsible long-term investor, we need to build understanding in the market about what we do and how we do it. We created our new communications department for two main purposes: internal communication within Adia and external communication to share Adia's story with our stakeholders,” he said.

“We are not targeting the retail or institutional investors. We are targeting recipient countries, regulators, and people who are specialising in the industry so that they understand us better and are able to attract the right sorts of opportunities and partners. So, one of the things that our communications team came up with was Adia's first annual review.”

Hajeri said Adia's website had also been upgraded to cover many subjects that it “never covered before.”

 

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