Adia targets emerging markets as long-term gains slow

Sovereign wealth fund expects China and India to power growth for the next ten years

The Adia office building in Abu Dhabi. Delores Johnson / The National
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The Abu Dhabi Investment Authority, one of the world's largest sovereign wealth funds, has pinned its hopes on emerging markets for the next ten years, after registering a second consecutive annual drop in its long-term gains.

"Economic growth in the decade ahead will be dominated by the emerging world," Sheikh Hamed bin Zayed Al Nahyan, Adia's managing director, said in the fund's annual review, published on Tuesday.

"We expect that over two-thirds of the growth in global GDP over the coming ten years will come from those emerging economies; with roughly half coming from China and India alone."

Adia said in its annual report that its 20-year and 30-year annualized rates of return were 6.1 per cent and 6.9 per cent in 2016. That compares to 6.5 per cent and 7.5 per cent respectively in 2015 for the same time frames.

Sheikh Hamed said the drop in gains was attributable to the exclusion strong returns in the mid-1980s and 1990s from the rolling averages, and stressed that Adia’s real rates of return remain consistent with historical levels.

Adia opened a new office in Hong Kong in October to tap growth in Asian emerging markets, amid what Adia described at the time as slowing global growth and asset valuations that had been inflated by low interest rates.

Adia has said it is upbeat about the economic outlook for China and would be open to more investments there.

The sovereign wealth fund started investing in China in 1992 when the market was first opened to foreign investors. Its portfolio in the country includes a US$2.5 billion Qualified Foreign Institutional Investor allocation to the China A market, as well as additional investments in China B shares and shares in China-focused companies listed on stock exchanges including Hong Kong and New York.