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The Abu Dhabi Investment Authority (ADIA) has long been seen as a cautious, secretive investor, but now appears intent on shedding that reputation.
This year, it has increased its investments in Indian real estate and healthcare; it has also signed a multibillion-dollar deal with a European transport company and joined a consortium trying to buy an Australian hospital operator.
ADIA manages $708.8 billion in assets, according to the Sovereign Wealth Fund Institute. Most of its recent private investments have been concentrated in emerging markets in Asia; it has only invested abroad.
“ADIA believes in the long-term growth of India’s middle class; it has an investment horizon of 20 years or more,” said Javier Capapé, director of sovereign wealth research at IE University’s Center for Change and Governance.
In June, ADIA agreed to pay 22 billion rupees for a 20% stake in India’s IIFL Home Finance, which provides real estate and construction loans. In a statement announcing the deal, ADIA officials highlighted the prospect of an “underserved and fast-growing affordable housing finance market” in India.
That same month, it launched a $590 million fund with Mumbai-based Kotak Investment Advisors to invest in office space in major Indian cities.
In April, ADIA agreed to buy a 10% stake in HDFC Capital, which invests in middle-income housing, for Rs 1.84 crore.
In a Q&A on ADIA’s website, Salem al-Darmaki, associate director of real estate and infrastructure, said the strategy was to make fewer but bigger acquisitions. He also noted that his organization took advantage of the slump in global public markets at the start of the pandemic to make “significant investments.”
Healthcare has a clear appeal to ADIA. July 18, economic times The fund is in talks to invest up to Rs 1,500 crore in the health insurance unit of India’s Aditya Birla Group, the report said. In April, ADIA joined a KKR-led consortium that offered to buy Australia’s Ramsay Health Care.
ADIA’s Infrastructure segment has minority stakes in infrastructure assets spanning a number of sectors, including transportation, utilities, energy and communications. These assets are low-volatility, provide reliable cash flow, and have low correlation with other asset classes, according to a statement from ADIA, which also mentioned its focus on renewable energy and digital assets. It also has stakes in fibre broadband networks in the US, Europe and India, as well as telecommunications towers in Europe and Asia Pacific.
Strong connections and acquisitions
In May, ADIA formed a joint venture with Boston real estate management firm Rockpoint to invest $2 billion in “industrial investment opportunities.” The following month, ADIA and New York-based Global Infrastructure Partners agreed to buy a 72.6 percent stake in Germany’s VTG Aktiengesellschaft (VTG), which leases 88,500 train cars to companies across Europe.
In the same month, ADIA acquired a 10% stake in energy company Sempra Infrastructure, which operates 1,500 megawatts of clean energy projects in North America, multiple liquefied natural gas (LNG) facilities and a 4,500-mile natural gas transportation network for $1.7 billion.
“What is ADIA looking at? [Singaporean SWFs] Tamasek and GIC really do a good job of identifying long-term macro trends and investing in assets that will profit from those trends,” Capapé said. “It’s not super opportunistic. “
ADIA’s latest investment comes after a major overhaul of its business. Last year, it cut 10% of its workforce, or 160 people. It has also launched an internal data science lab of 50 people and plans to double the size of its private equity investment team to 120 over the next three years, a spokesman said.
Other changes include merging its external and internal equities divisions and closing its Japan, Latin America, South Africa and Emerging European equities investment teams. Passive funds and third parties now manage ADIA’s equity holdings in these regions.
“ADIA is a fairly sophisticated investor with a large workforce,” Capapé said. “It’s diversified across many industries and asset classes, so it makes sense to try a more innovative long-term approach to investing.”
In 2020, ADIA increased its allocation to private equity and infrastructure in its first portfolio realignment since 2012. 32% to 42% of its portfolio is now in developed market equities; 10% to 20% in developing market equities; 1% to 5% in small cap stocks; 10% to 20% in government bonds Medium; Real Estate, Private Equity, Credit, Hedge Funds and Managed Futures 5% to 10% each, Infrastructure 2% to 7% and Cash 10%.
The group also reduced its exposure to “developed Asia” from 10% to 20% to between 5% and 15%, which ADIA said was due to a change in the region’s weight in the global index. Geographically, 35% to 50% of its assets are in North America, 20% to 35% in Europe, and 15% to 25% in emerging markets. Overall, 55% of its portfolio is actively managed and 45% passively managed.
(Reporting by Matt Smith; Editing by Saipan Scalia)
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