The government of Abu Dhabi controls the Abu Dhabi Investment Authority, which is the third-largest sovereign wealth fund in the world by size. The fund’s main objectives are to diversify money derived from oil into different sectors of the global economy to preserve and grow capital. Sovereign wealth funds, particularly those out of the Middle East, have become more and more prevalent, with investment actively spanning the globe.
Golf was once considered a relaxing event and far away from the world of geopolitics. For most Americans, that idea was shattered with the rise of the Saudi-backed LIV Golf tour and its eventual merger with the PGA tour. Never before had opinions on golf been intertwined with issues like Saudi Arabia’s human rights record. Saudi Arabia, like many countries in the Middle East, has an extremely powerful sovereign wealth fund. In fact, there has been so much football investment by Middle Eastern sovereign wealth funds that matches in Europe can seem like proxy battles between Middle East nation-states. Among the most prominent of these sovereign wealth funds is the Abu Dhabi Investment Authority. Learn more about it below.
What is the Abu Dhabi Investment Authority?
The Abu Dhabi investment authority is the sovereign wealth fund that the government of Abu Dhabi, United Arab Emirates, controls. By capitalization, the Abu Dhabi Investment Authority is the third largest sovereign wealth fund, with $708 billion under management (as of 2022). The fund has investments spanning every continent in the world with one mission — to preserve, diversify and grow the immense capital that was ascertained via oil revenues.
History of the Abu Dhabi Investment Authority
In 1976, the emirate of Abu Dhabi realized it had a problem that needed to be solved. It was quite a good problem to have — excess money driven by oil sales but nowhere to put it. Thus, the idea of an independent investment institution that would handle the government of Abu Dhabi’s considerable oil wealth was born. Today, that entity is called the Abu Dhabi Investment Authority (ADIA), a powerful sovereign wealth fund based in the Emirate of Abu Dhabi, that holds a diversified global investment portfolio spanning numerous asset classes and strategies.
Abu Dhabi Investment Authority strategy
The Abu Dhabi Investment Authority’s No. 1 goal is to preserve the wealth of Abu Dhabi while growing the capital under management. To do this, they use the following strategies:
- Global diversification
- Long-term perspective
- Different industries and asset classes
- Research and a data-driven approach
ADIA diversifies on a global level. If something happens in China but Europe is doing fine, the risk is hedged. This also applies to different currencies, as having your eggs in more than one basket is helpful, as far as currency is concerned. If the dollar takes a dive, they could hedge that by holding assets in Swiss francs or yen. Below is a map of all the locations where ADIA has invested.
ADIA always goes in with a long-term perspective, which is common among sovereign wealth funds. This is a big reason why the Saudi Arabian Wealth Fund can stomach tough losses on things like LIV golf; they see the long-term strategy. They often use “long-term value creation” as their primary strategy for investment. However, ADIA prides itself on prudently investing funds and not taking on too much risk with its overall investment strategy.
Hannah Sanderson, a financial expert and founder of Clever Canadian, sees their longer time frame as having both good and bad sides. “They typically have a longer investment horizon and can provide access to opportunities in specific geographies or sectors,” she says. “However, one of the disadvantages might be the political influence these funds might carry, leading to potential complications if the home country’s foreign policies change.”
Different asset industries and asset classes
The ADIA is spread across all asset classes, from real estate to private equity. Below are some of the industries and asset classes in which it has invested. In fact, as one of the largest sovereign wealth funds in the world, it covers over a dozen asset classes. Some of these include:
- Public equity
- Private equity
- Fixed-income products
- Cryptocurrency/alternative investments
- Real estate
In addition to the different types of asset classes, ADIA also diversifies across a number of industries. This is to hedge against changes in technology, markets, or government regulation. Below is a table of some of the asset classes that ADIA has invested in.
|Energy and Utilities||
Please note that not all information regarding ADIA’s holdings and investments is made public. We only provide the information that is available to the general public. There are most likely quite a few other countries and industries in which they invest.
ADIA utilizes both an in-house team as well as external managers to manage its assets. Many times, a specific manager will oversee portfolios that are managed by a group of external managers such as hedge funds. This allows ADIA to tap into specialized expertise while maintaining total control over its investment portfolios. Because ADIA is so large, it can do business in ways that investors in other funds and other pooled investment vehicles might not be able to.
Research and data-driven approach
ADIA takes advantage of all the new technology available for data mining and uses it to fuel its data-driven approach when it comes to research. It uses this data-driven research approach to model short-term and long-term scenarios. ADIA also directs its portfolio and acquisition guidelines to fit in with the data that it has collected.
If you’re ready to invest and need some help deciding where to put your money, these brokerages can help.
The rise of sovereign wealth funds
Sovereign wealth funds are not just a phenomenon of oil-rich Middle Eastern kingdoms and emirates. Many countries have sovereign wealth funds that operate to invest on their behalf. For example, the famous Malaysian 1MDB fund that financed the movie, “The Wolf of Wall Street,” and brought the prime minister bail on corruption charges, was also a sovereign wealth fund.
But is doing business with sovereign wealth funds a risk from a company perspective? “The big win is their deep pockets — they can drop serious coin, which can fast-track growth,” says Sudhir Khatwani, a banking professional. “Plus, they’re typically solidly run and less prone to wild swings, offering a good degree of stability. On the flip side, money from a sovereign wealth fund may come with some strings attached — think political influence or rules about how you run your business. And remember, they’ve got their own interests to look after, which may not always match up with your business plans.”
Sovereign wealth funds are also willing to take a risk if it fits into their overall plan. For instance, Saudia Arabia’s investment in the PGA via its LIV merger might cause it to start investing in more companies associated with golf. Take Noteefy, for instance, which is a customized tee-booking assistant for golfers and golf courses. It has a system in place that makes booking tee times, which can be painful, into an easy experience all on one app. A growing company like Noteefy in the golf space makes sense for the Saudi fund’s overall investment strategy.
What does the Abu Dhabi Investment Authority own?
The Abu Dhabi Investment Authority is owned by the government of Abu Dhabi, an Arab emirate. It is one of a number of sovereign wealth funds that are owned by governments globally.
How big is the Abu Dhabi Investment Authority fund?
At the time of this writing, the Abu Dhabi Investment Fund is worth over $850 billion, the third largest sovereign wealth fund in the world. ADIA’s ability to collect more capital is driven almost exclusively by the price of oil, and the government of Abu Dhabi’s ability to supply it.
Is ADQ a sovereign wealth fund?
Yes, ADQ is the smallest of Abu Dhabi’s three sovereign wealth funds. ADIA is the largest of Abu Dhabi’s sovereign wealth funds and is therefore the most notorious. However, ADQ still manages over $150 billion, which is a substantial amount of money.
- The Abu Dhabi Investment Authority is the main sovereign wealth fund owned by the government of Abu Dhabi and the third largest such fund in the world.
- The ADIA was created to invest the billions of dollars in surplus capital that oil sales had created.
- The ADIA’s main goal is to preserve and grow capital. To do this, it diversifies across a number of different industries, asset classes, and regions.
- Sovereign wealth funds are becoming more and more prominent, and there can be upsides as well as downsides to doing business with them.
View Article Sources
- Investments – Abu Dhabi Investment Authority
- ADIA: Sovereign Wealth Fund in United Arab Emirates, Middle East – Sovereign Wealth Fund Institute
- Abu Dhabi Investment Authority – International Forum of Sovereign Wealth Funds
- Mastering the Art of Diversification in Investing: Maximizing Returns and Minimizing Risks – SuperMoney
- Hedge: What It Is and How It Works in Investing – SuperMoney
- Private Equity vs. Investment Banking: Top 3 Differences – SuperMoney
- Capitalizing on Capital Gains: A Deep Dive into Definition, Rules, Taxes, and Asset Types – SuperMoney
- Understanding Data Mining: Methods, Pros and Cons, and Real-World Examples – SuperMoney