Abu Dhabi set to increase private equity activities

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Headquarters of the Abu Dhabi Investment Authority along the Abu Dhabi seafront. Photo - Panoramio.com

The Abu Dhabi Investment Authority, one of the world’s largest sovereign wealth funds, is ramping up its private equity activities after a relatively subdued period over the past two years, sources familiar with the funds’ plans said.

Staffing within ADIA’s private equity department is likely to more than double from its current complement of around two dozen, sources said, although no specific allocation targets have been set.

“There are significant plans to increase private equity staffing, several industry executives have been approached in the last month,” said one source on request of anonymity.

The Abu Dhabi fund is also looking to significantly boost its investments in infrastructure as it is not satisfied with its current exposure, sources added.


ADIA – whose assets range from Citigroup bonds to a stake in London’s Gatwick Airport – did not disclose its net worth and declined to comment on the changes. The Sovereign Wealth Fund Institute estimates its value at $627bn and ranks it among the largest in the world.

ADIA is looking to raise its allocations in some of the world’s largest private equity houses and has arranged meetings with many of them, several sources familiar with the matter said.

It is also adding broader geographic expertise in Asia, Africa, Latin America and Australia.

“Discussions are on with some leading players and some not so well known names about allocating more on the private equity side,” another private equity source said, who like others declined to be named because of their ties to the fund.

The sovereign fund began investing in private equity in 1989. In its latest portfolio review published on Tuesday, two to eight percent of its assets are invested in private equity.

Based on the range and estimated size of ADIA, its private equity allocation could range between $12.5 billion to $50 billion, but a source indicated that given the low level of activity, holdings were currently closer to the lower end of that range.

ADIA appointed private equity veteran James Kester as chief investment officer in November 2010 after a prolonged search. He replaced Georges Sudarskis, who had ratcheted up ADIA’s portfolio considerably over the last 10 years before leaving to launch his own company.


The global private equity industry is estimated to be between $800bn to $2 trillion, but as a number of funds are still struggling to deploy assets collected and committed before the financial crisis, many say it will be tough for the industry to digest a large influx of money from sovereign funds.

ADIA is also keen to put more money into ongoing programmes to develop local infrastructure, including transport networks, schools and hospitals, and diversified industries in order to break the emirate’s reliance on increasingly volatile oil prices, the source explained.

The fund’s infrastructure investment allocation is among the smallest within total assets under management, with a targeted range between 1 to 5 percent.

“Historically investors in the Middle East have been comfortable with real assets and may now be more so, particularly after the whack many SWFs took in the financial crisis and resultant scrutiny in their home countries,” said one expert who deals regularly with sovereign wealth funds.

Given historically low yields, ADIA appears to be looking at its government debt holdings and how best to structure the portfolio, in line with the thinking of many other large wealth managers.

Large sovereign funds have been willing to allocate more money to alternative investments like private equity in the recent past given low returns in conservative asset classes such as US treasuries.

China Investment Corp. (CIC), the country’s $400bn sovereign wealth fund, made $35.7bn in fresh offshore investment last year, with a focus on infrastructure projects, private equity investment and real estate trusts (REITs).

Qatar Investment Authority (QIA), among the most aggressive of sovereign funds, raised its private equity allocation by $19bn in 2010, a source familiar with the matter said.

“It is widely known that sovereign wealth funds want to add to private equity allocations, and for a variety of reasons,” said one London-based private equity insider who manages SWF money.

“With inflation at 4-5 percent and Treasury yields almost negligible, they’re losing money even if their currencies are pegged to the dollar.”

ADIA returned 7.6 percent on an?annual basis over a 20-year period, as of December 31, 2010, it said in a review released Tuesday, in which it also raised concerns about global economic growth prospects.

Last month, ADIA restructured its external equities department, separating indexed funds from active funds as part of a more focused strategy.


Private equity sector lost investors’ confidence in the downturn. But the market has rebound now, and this push by ADIA will all but show positive results.

Gulf Capital, one of the most successful alternative asset management firms in the region, was named the winner of the ‘Best Private Equity Firm’ Award in the Middle East at the prestigious Banker Middle East Industry Awards 2011.

The Firm?s achievements in the private equity arena, its fundraising track record to date and the growth of its portfolio companies, which were secured despite a tough economic environment, firmly cemented Gulf Capital?s position as the Best Private Equity Firm in the Middle East.

Organised by CPI Financial, the awards recognised both corporate and individual distinctions amongst top performers in the industry at an event that brought together more than 400 distinguished regional and global industry experts and decision-makers to honour and celebrate excellence in the banking and finance industry.

Sources: Arabianbusiness, gulfcapital

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