Global growth to stay hesitant

ABU DHABI — Abu Dhabi Investment Authority, or ADIA, sees the global economic growth to remain hesitant in the near term.

By Haseeb Haider

Published: Wed 14 Sep 2011, 10:53 PM

Last updated: Tue 7 Apr 2015, 5:48 AM

The ADIA’s forecast comes as governments in major developed markets begin the sensitive task of cutting potentially burdensome debt levels without undermining growth.

“Returns from equities will gradually revert close to their long-term historical average between six to eight per cent,” the ADIA said in its yearly review issued on Tuesday.

The review said that assuming bond yields remain low and in the absence of major negative macro events, equities appear relatively attractive even when using conservative assumptions with regard to the equity-risk premium.

ADIA didn’t not revealed its balance sheet. Some of the fund’s high profile investments include a 15 per cent stake in UK’s Gatwick Airport, a 4.9 per cent holding in Citigroup and a 12.5 per cent stake in Egypt’s Arab International Bank, according to data. In his letter, ADIA managing director Shaikh Hamed bin Zayed Al Nahyan said two years after the crisis, the investment climate is set to undergo considerable change as economic policies evolve from measures focused on stimulus to steps to ensure the sustainability of growth.

Large increases in government debt to fight recession have drawn the most attention, during the period, he said. “They now have the sensitive task of maintaining and increasing growth, while cutting debt levels quickly enough to prevent an unwelcome rise in bond yields,” he said. He said the shift in global economic weight from developed to fast-growth emerging economies has accelerated as a result of the financial crisis. In 2010, while remaining diversified across all major global markets, ADIA continued to benefit from its decision to tilt exposures in the portfolio towards asset classes and regions able to benefit from better growth prospects. “This is an approach that remains in place as we enter 2011,” he said.

“ADIA, as a responsible investor, would continue to play stability in global financial markets,” Shaikh Hamed said.

ADIA manages a diversified global investment portfolio, across more than two dozen asset classes and subcategories, including quoted equities, fixed income, real estate, private equity, alternatives and infrastructure.

Approximately 80 per cent of ADIA’s assets are managed by external fund managers, while 60 per cent of its assets are invested in index-replicating strategies. In US dollar terms, the 20-year and 30-year annualised rates of return for the ADIA portfolio were 7.6 per cent and 8.1 per cent, respectively, as of 31 December 2010, the review said.

A big chunk of ADIA’s funds are invested in North America, where a minimum of 35 per cent and a maximum of 50 per cent is allocated, followed by Europe with a minimum of 25 per cent and a maximum of 35 is invested.

Developed Asia gets a minimum of 10 per cent and maximum of 20 per cent while Emerging markets get 15 per cent and a maximum of 25 per cent

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