Abu Dhabi fund sees potential despite uncertainty

DUBAI, United Arab Emirates (AP) - The Abu Dhabi Investment Authority believes the world economy offers opportunities for it and other patient investors, despite an uncertain outlook, the government-run fund's managing director said in a report released Monday.

ADIA's 2011 annual review shed little new light on the operations of the world's largest sovereign wealth fund. But the comments from Managing Director Hamed bin Zayed Al Nahyan suggest the tight-lipped fund remains guardedly optimistic about a recovery in economic growth.

"Despite facing undoubted short-term risks, the global economy offers many exciting and important opportunities. Economic growth each year is advancing millions of people out of poverty and into more active participation in the global economy," he said.

The managing director, a member of the emirate's ruling family, suggested that investors such as ADIA can help fuel economic advances by pumping cash into stocks, bonds, hedge funds and other investments.

"As a long-term investor, we see ourselves ... as providers of this necessary capital, with the advantage of patience and the ability to ride out dips in the economic cycle," he said.

ADIA has generated an average return on its investments of 6.9 percent annually over the past 20 years and 8.1 percent annually over the last 30 years, according to the 2011 report. That compared with annualized returns of 7.6 percent and 8.1 percent over similar periods through the end of 2010.

ADIA did not provide financial data for 2011 alone, making it difficult to deduct how its investments fared over the past year.

The fund, the biggest of several Abu Dhabi uses to manage its oil wealth, is chaired by the emirate's hereditary ruler, Sheik Khalifa bin Zayed Al Nahyan.

Abu Dhabi is the capital of the United Arab Emirates, OPEC's third-largest oil exporter. It controls nearly all of the federation's oil reserves.

ADIA and other sovereign wealth funds agreed on a voluntary set of principles in 2008 calling for greater openness by the pools of government-held wealth. The move was aimed at countering concerns, particularly in Western countries, about the funds' growing size and perceptions that their investments could be politically motivated.

This is the third year that ADIA has released an annual report.

ADIA has repeatedly said it does not want to play an active management role in companies it buys into, investing solely on economic terms.

While big-ticket purchases such as its $7.5 billion investment in Citigroup Inc. in 2007 make occasional headlines, many of ADIA's investments are more mundane.

About 80 percent of its assets are handled by outside fund managers, and some 60 percent track established indexes such as the S&P 500, according to its report. It aims to keep 35 to 50 percent of its holdings in North America, and another 25 to 35 percent in Europe.

The fund does not release the size of its assets.

The U.S.-based Sovereign Wealth Fund Institute ranks ADIA as the largest such fund, with assets under management of $627 billion. That puts it ahead of government funds in Norway, China and Saudi Arabia.

Other estimates of its holdings have ranged from less than $400 billion to $875 billion and beyond.

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