Tuesday, Sep 13, 2011
DUBAI (Zawya Dow Jones)--The Abu Dhabi Investment Authority, estimated to be the Middle East's largest sovereign wealth fund, sees fast-growing emerging markets becoming more influential than their more developed peers amid global economic turbulence, while equity market returns should return to long-term historical averages once the recovery takes hold.
In its 2010 annual review published Tuesday, Abu Dhabi Investment Authority, or ADIA, said it anticipates global economic growth to remain hesitant in the near term, as governments in major developed markets begin the tricky task of cutting potentially burdensome debt levels without undermining growth.
"However, as we enter the post-recovery phase, we remain confident that returns from equities will gradually revert close to their long term historical average between 6%-8%," it said.
"Assuming bond yields remain low--and in the absence of major negative macro events--equities appear relatively attractive even when using conservative assumptions with regard to the equity-risk premium," the sovereign wealth fund added.
Established in 1976, ADIA invests funds and oil revenue surpluses on behalf of the Abu Dhabi government. Its investments are spread across equities, fixed income, real estate, private equity, alternatives and infrastructure. Some of the fund's high profile investments include a 15% stake in UK's Gatwick Airport, a 4.9% holding in the U.S. investment bank Citigroup (C) and a 12.5% stake in Egypt's Arab International Bank, according to Zawya.com data.
About 80% of ADIA's assets are managed by external fund managers, the wealth fund said. Some 60% of assets are invested in index-replicating strategies.
ADIA's Managing Director Hamed bin Zayed Al Nehayan said one result of the financial crisis has been the increased influence and economic clout of emerging economies.
"While developed economies continue to demonstrate their ability to innovate and grow, the secular shift in global economic weight from developed to fast-grow emerging economies has accelerated as a result of the financial crisis," he said. "Greater demand from this expanded global marketplace will provide a positive investment climate as it drives new discoveries in life sciences, alternative energy, and other emerging technologies."
ADIA said 35%-45% of its portfolio is currently invested in developed equities while 10%-20% is in emerging market stocks. The sovereign wealth fund said its 20-year annualized rate of return in 2010 was 7.6%, compared with 6.5% in 2009.
According to ADIA's annual review, 35%-50% of its investments are located in North America, followed by Europe and Asia, while only 15%-25% is held in emerging markets.
-By Mirna Sleiman, Dow Jones Newswires; +9714 446-1698; mirna.sleiman@dowjones.com
Copyright (c) 2011 Dow Jones & Co.
(END) Dow Jones Newswires
13-09-11 0643GMT
