Tuesday, Jul 01, 2014

By Asa Fitch

DUBAI--The Abu Dhabi Investment Authority, one of the world's biggest sovereign wealth funds, kept target asset-allocation ranges constant last year as it projected a continuation of emerging-market growth and slow recovery in the developed world.

ADIA, which is estimated by the Sovereign Wealth Fund Institute to hold $773 billion in assets, added staff last year on its real estate, infrastructure and private equities teams, but gave few clues in an annual review about how it is realigning itself to confront challenges in the global economy.

Hamad bin Zayed Al Nahyan, ADIA's managing director, said in the review that ADIA expected a continuation of a trend toward emerging-market growth as developed markets gradually repair themselves following the global financial crisis.

China in particular is poised for economic reforms that will allow markets to play a bigger role in allocating capital, the managing director said. ADIA got approval from Chinese authorities last year to increase its allocation to Class A shares in mainland China to $1 billion from $500 million. But work remains to be done to fix unemployment, make financial regulation more effective and improve government finances around the world, Mr. Nahyan said.

ADIA revealed in the review that it made a 20-year annualized return of 7.2% in 2013. That was lower than the 7.6% 20-year annualized return it announced for 2012.

The annual review, first published in 2010, is part of ADIA's effort to disclose more about its operations, organizational structure and investment strategies. ADIA is owned by the Abu Dhabi government and invests surplus energy revenues in global markets on behalf of the state.

This year's review, which covers 2013, said ADIA employed 1,500 people, up from about 1,400 in 2012.

The additions come as the fund looks increasingly to manage its money internally rather than putting money in funds and other structures handled by investment professionals not employed by ADIA. More hiring is planned this year in infrastructure, alternative investments and equities departments, according to the review. Nevertheless, about 75% of ADIA's assets are still managed externally.

ADIA said in its review that its targeted allocation to developed-market equities ranged from 32% to 42%. The emerging-market equities target ranges from 10% to 20%, the government bonds target is another 10% to 20% and the private equity allocation is 2% to 8% of ADIA's long-term portfolio.

None of the targets changed compared with 2012. Geographical targets also remained constant.

That contrasts with a shift the fund disclosed in last year's review, when it reduced the lower bound of targeted allocations to Europe, while also lowering targeted allocations for developed-market stocks.

The review this year said Jua'an Al Dhaheri, one of ADIA's directors, died after spending 36 years at the fund. Mr. Dhaheri wasn't replaced on the board, but was replaced as deputy chairman of its investment committee by Hareb Aldarmaki, the executive director of the private equities department, the review showed.

ADIA also said it restructured its accounts and IT departments last year.

Write to Asa Fitch at asa.fitch@wsj.com

(END) Dow Jones Newswires

01-07-14 0535GMT