Dec 23 2009 |
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Wealth fund assets recover ground
The value of assets managed by Abu Dhabi's two leading sovereign wealth funds is likely to have risen to US$425 billion (Dh1.55 trillion) after this year's rally in oil prices and global financial markets, estimates by an economic consultancy show.Rachel Ziemba, an economist at RGE Monitor in New York, said the combined assets of the Abu Dhabi Investment Authority (ADIA) and the Abu Dhabi Investment Council (ADIC) had probably recovered by as much as 20 per cent after major losses from the global financial crisis.
"That implies quite a strong revaluation of the portfolio since February when I estimated AUM [assets under management] was closer to $300bn," Ms Ziemba said.
She and her fellow economist Brad Setser, formerly of the council on foreign relations in New York, in 2007 devised one of the most authoritative estimates of the size of sovereign wealth funds during the controversy over their growing influence in global financial markets.
Mr Setser has since become an adviser to the Obama administration.
Most sovereign funds do not reveal details about their size or investments. Little is known, for example, about
ADIA
, which is widely recognised as one of the world's largest sovereign funds, as well as one of its most secretive.
Contacted last week, a spokesman for
ADIA
said its policy was to not comment on the size of its cash flows. Officials from
ADIC
could not be reached for comment.
ADIC
was created in 2006 and endowed in 2007 by carving out
ADIA
's domestic and regional assets. Many assumed
ADIC
would limit itself to a regional focus, but its purchase of the Chrysler Building in Manhattan proved its focus would be as wide-ranging as that of
ADIA
.
In December last year, Mr Setser and Ms Ziemba estimated that the financial crisis had reduced the assets of
ADIA
and
ADIC
to less than $350bn, from about $490bn at the end of 2007. Of that, they estimated
ADIA
shrank to about $203bn, from $328bn.
But the revenue projections in the budget were determined using a forecast for oil of $50 a barrel. Oil has averaged more than $60 this year and is now more than $70 a barrel. That means that ADIA and ADIC may be receiving cash after all.
Moreover, Ms Ziemba said, ADIA and ADIC were undoubtedly benefiting from the sharp rally in financial markets this year, with prices rising because of hopes for an economic recovery, and because record-low US interest rates are prompting investors to push cheap dollars into markets worldwide.
By Wayne Arnold
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