Abu Dhabi Investment Authority comes out
The International Herald Tribune:
After decades in the shadows, the fund, the Abu Dhabi Investment Authority, is turning heads on Wall Street and in Washington by making high-profile investments in the United States and elsewhere.Actually, there is a public to answer to. Part of the balancing act is to make sure the citizenry remains content with the welfare system. You might think that part of that strategy would be to keep the public ignorant of the size of the country's wealth. But you might be wrong.
Known as ADIA (pronounced ah-DEE-ah), the fund recently formed a small team that is now buying big stakes in Western companies. This unit masterminded ADIA's $7.5 billion investment in Citigroup, the largest U.S. bank, in November. It has also taken a large position in Toll Brothers, one of America's biggest home builders.
"There is an idea that Abu Dhabi should not be the underdog of the map," said Frauke Heard-Bey, a historian who has written a book about the political emergence of the United Arab Emirates. "They have the money to buy companies that are ailing, and why should they not? Why not make a mark?"
ADIA is the largest of the world's sovereign wealth funds, giant pools of money controlled by cash-rich governments, particularly in Asia and Middle East. But Abu Dhabi, the wealthiest of the seven Arab emirates, says little about its fund. Few outsiders know for sure where ADIA invests, or even how much money it controls. And secrecy breeds hyperbole; some estimates of the fund's size exceed $1 trillion.
Since ADIA's genesis in 1976, the fund has followed a conservative investment approach. It has farmed out its assets to foreign money managers and taken stakes in companies based upon their weighting in benchmark stock indexes like the Standard & Poor's 500. ADIA is also one of the largest institutional investors in hedge funds and private-equity funds. This approach has served ADIA well and reflects the strongly felt notion that the fund's ultimate purpose is to serve as a financial reserve for Abu Dhabi in times when oil revenues are less robust.
With oil at about $100 a barrel, bankers and analysts estimate Abu Dhabi produces a surplus of at least $50 billion a year. Given the emirate's small population, 80 percent of which is foreign born, even the most expansive investment and welfare policies make it hard to put a dent in such a sum.
People who worked at ADIA from its earliest days in the late 1970s and 1980s say that the fund's reticence dates to its formation.
Some see this as a reflection of Abu Dhabi's small size, insular culture and geographical vulnerability, a sense that the less that is known about the specifics of ADIA's hoard, the better.
"ADIA does not answer to a wide public at home," said David Mack, a former United States ambassador to the United Arab Emirates.
"They are a small country in an area with some nasty countries like Iran that can make trouble for them. They don't like to advertise."