Abu Dhabi Investment Authority (ADIA) is expressing optimism for public equities in 2023 following last year’s market downturn. The sovereign wealth fund, managing the proceeds from oil exports in the Gulf emirate, believes that the decline in stock valuations due to high inflation and rising interest rates has made them more attractive. In its 2022 annual review, ADIA also revealed its interest in the private credit market as banks grow cautious about lending amid rising financing costs.
While ADIA does not disclose the exact value of its assets, industry specialist Global SWF estimates them at $993 billion. It achieved annualized rates of return of 7.1% and 7.0% over the past 20 and 30 years, respectively. In comparison, the rates were 7.3% in 2021. ADIA anticipates continued support for both public and private equities, particularly if profitability remains resilient in the face of supply chain tensions and labor availability challenges.
Looking ahead, ADIA plans to focus on growth in private markets, including private credit as an alternative to traditional bank lending. It has increased the allocation range for private equity to 10%-15% of its total portfolio in 2022, up from 7%-12% in 2021. Additionally, ADIA reduced its cash allocation range to 0%-5% from 0%-10% in 2021.
In terms of its real estate investments, ADIA increased its exposure to data centers in China, India, and the wider Asia-Pacific region. It also expanded its exposure to credit platforms in the United States, Europe, and Australia, following a retreat by banks due to higher financing costs.
During the pandemic, ADIA went through a significant restructuring of its operations. It consolidated middle and back office activities and centralized processes. It also separated its infrastructure and real estate investment teams into separate departments. As a result, the fund’s workforce decreased to 1,380 by the end of 2022, down from 1,520 in 2021.
Despite the reduction in headcount, ADIA has actively recruited in investment areas, particularly in private markets and technology-driven specializations. The fund’s quantitative research and development team, which integrates investment decisions with machine learning and artificial intelligence, now has over 50 experts and continues to hire.
As ADIA remains optimistic about public equities and seeks opportunities in the private credit market, it reaffirms its commitment to deliver value and consistently capitalize on emerging trends and potential returns.
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