Resurgent global economy lifts Abu Dhabi Investment Authority returns

Abu Dhabi's sovereign wealth fund reports gain in annualised returns of its investments in 2014 after stocks and bond prices rose.

The Sovereign Wealth Fund Institute estimates that Adia’s assets are worth approximately US$773 billion. Courtesy Abu Dhabi Investment Authority

The Abu Dhabi Investment Authority, one of the world’s biggest sovereign wealth funds, said its long-term returns last year rose as world equity and bond markets inched up amid low interest rates and a recovering global economy.

Adia said it was optimistic about 2015, even as UAE economic growth is expected to slow after oil prices were nearly cut in half last year. The fund does not invest in domestic assets.

"The drop in oil prices will provide a boost to the economies of Europe, Japan, China and other big net oil importers," said Hamed bin Zayed Al Nahyan, Adia's managing director.

“Outperformance of the US economy provides a welcome source of demand for the rest of the world. The recent evolution of asset prices – stronger US dollar, lower bond yields and broadly steady equity prices – should work in the direction of improving economic outcomes.”

The fund had a 20-year annual rate of return of 7.4 per cent and a 30-year rate of return of 8.4 per cent as of the end of 2014, it said. That was up from returns of 7.2 per cent and 8.3 per cent over the same periods, respectively, at the end of 2013.

The MSCI ACWI Index, a free-float weighted equity index that includes both emerging and developed world markets, increased 2.1 per cent last year, but there was wide divergence among countries.

While the S&P 500, the benchmark US stock index, gained 11.4 per cent, MSCI’s emerging markets measure fell 4.6 per cent. The Bank of America Merrill Lynch Global Fixed Income Market Index rose 1.1 per cent.

Mr Al Nahyan judged that capital markets took in their stride the oil drop and divergence of the economic fortunes of the economies of the US and Japan and Europe as well as concerns of slowing growth in China.

The fund, has in recent years, emphasised its interest in emerging market economies despite the financial and political woes that have befallen countries such as Russia and Brazil.

“Despite evident stresses that appeared last year in several of these countries, we see grounds for optimism: China’s government continues to improve its economic governance and prepare for a wider role in global capital markets,” Mr Al Nahyan said. “New leadership in India has signalled a renewed commitment to reform and modernisation of the economy.”

Adia’s report does not disclose the value of its assets although it provides a breakdown of its holdings by asset class and regions. Unchanged from last year, Adia said it invests a minimum of 15 per cent and a maximum of 25 per cent in emerging markets.

Adia last year also increased the size of its staff by 10 per cent to 1,650 from 1,500 at the end of 2013.

The Sovereign Wealth Fund Institute estimates that Adia’s assets are worth approximately US$773 billion.

Follow The National's Business section on Twitter