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The Abu Dhabi Investment Authority, one of the world’s biggest sovereign wealth funds, said its long-term returns in 2011 dropped as global equity markets fell.
The fund has a 20-year annual rate of return of 6.9 percent and a 30-year rate of return of 8.1 percent as of the end of last year, it said in its annual report. That compares with 20- year and 30-year annual returns of 7.6 percent and 8.1 percent respectively at the end of 2010.
“Despite many twists and turns, the global economy continued its recovery last year,” Managing Director Hamed bin Zayed Al Nahyan said in the review. “Economic activity was affected by a number of serious shocks, most notably the tragic events in Japan, and the financial stress surrounding the sovereign debt crisis in Europe.”
The MSCI ACWI Index (MXWD), a free-float weighted equity index that includes both emerging and developed world markets, fell 9.4 percent in 2011, according to data compiled by Bloomberg. The MSCI Emerging Markets Index (MXEF) lost 20 percent last year.
ADIA, which invests a minimum of 10 percent and maximum of 20 percent in emerging market equities, said it expects emerging market equities to outperform developed markets because of more attractive valuations.
ADIA’s report doesn’t disclose the value of its assets although it provides a breakdown of its holdings by asset class and regions. No changes were made in 2011 to the allocations ADIA makes to the 10 asset classes in its portfolio. Developed markets continued to have the largest allocation with a minimum of 35 percent and a maximum of 45 percent weighting in its portfolio.
Between 10 percent to 20 percent is in government bonds, and as much as 10 percent is dedicated to real estate, credit and so-called alternative assets such as hedge funds and managed funds, according to the report.
“With the current level of government bond yields, the valuation of global equities remains attractive for long-term investors in general and especially in the emerging markets space,” the Abu Dhabi Investment Authority said in its 2011 annual review today. “Indeed, emerging markets have already outperformed their developed peers over the past decade and we expect this to continue.”
ADIA said it expects central banks such as those in China and India to continue with their counter-cyclical monetary policies.
The Abu Dhabi-based wealth fund also said that it combined its four geographically-focused “external equities” departments into two: the Indexed Funds Departments, which includes all the passively-managed equity portfolios and the External Equities department which comprises all the fund’s external actively-managed portfolios.
Abu Dhabi, capital of the United Arab Emirates and home to about 7 percent of the world’s proven oil reserves, is trying to diversify away from oil by investing globally. ADIA and its Norwegian and Chinese peers are the three largest sovereign wealth funds in the world, managing more than $1 trillion among them, London-based research firm Preqin Ltd. said in March 2010.
The global economy expanded 3.9 percent in 2011 after growing 5.3 percent in 2010, according to estimates from the International Monetary Fund. The Standard & Poor’s 500 share index gained 2.1 percent in 2011 as the U.S. economy grew 1.7 percent down from 3 percent growth in 2010, the IMF said.
Abu Dhabi, the biggest of seven emirates in the U.A.E., set up ADIA in 1976 to manage proceeds from its oil wealth. ADIA doesn’t invest in the U.A.E. or typically in the Gulf Arab region. It had assets valued at $328 billion at the end of 2008, according to economists at the New York-based Council on Foreign Relations.
ADIA increased its headcount to 1,275 in 2011 from 1,200 in 2010, the report said.
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