The Abu Dhabi Investment Authority (ADIA) has radically pared back its staffing levels in a push towards greater efficiency and focus.
Global SWF’s research estimates that around 200 personnel have been fired over the past two years, the latest being the Latin America equities team. The US$829 billion fund terminated the team at the end of March, said Bloomberg, affecting seven portfolio managers, two of whom are redeployed within the sovereign wealth fund. It will retain its external managers to maintain exposure to the region. ADIA has also dismissed teams covering Japan, Emerging Europe and South Africa.
The moves are in line with the strategic changes outlined in ADIA’s most recent annual report, In terms of geographical exposures, the target band for Developed Asia was reduced from 10%-20% to 5%-15% as ADIA removed its internally managed Japan mandate and the Equities Department reallocated resources to other markets that “offer more sustained outperformance in the future.”
After shutting down its Latin American team, this week ADIA’s indirectly held stake in BR Properties’ portfolio was sold to Brookfield. ADIA owns 90% of GP Capital Partners VI, which agreed to sell its 60% stake in the portfolio six years after its initial investment. Last week, it sold all its public equity holdings on São Paulo’s B3 stock exchange, exiting almost 30 listed companies.
The Emirati fund is seeking to align its strategic asset allocation with the norm in the sovereign investor universe. It indicated a shift towards private markets with allocation bands for private equity rising from 2-8% to 5-10% while infrastructure is raised from 1-5% to 2-7%. At the same time, public equities are continuing to lose weight in the portfolio with internal and external equities combined into a single department, which sees its representation in the Investment Committee reduced. As such, staff restructuring was inevitable, along with the way ADIA conducts its business.
The cut in internal management of certain regional portfolios has been accompanied by a greater emphasis on co-investments, such as the US$2 billion industrial real estate joint venture with Boston-based real estate investment manager Rockpoint, signed earlier this month. ADIA has emerged as a leading contributor to real estate joint ventures, representing more than a fifth of the more than US$10 billion invested by SOIs so far this year in these platforms. The Emirati investor is bolstering its ties with existing joint venture partners, in preference to going it alone and originating its own deals.
The Rockpoint deal came two months after ADIA created a platform with Landmark Properties (Landmark), initially targeting US$1 billion of investments in US value-add student housing properties. ADIA also increased its exposure to Australia’s booming industrial real estate sector by more than A$1 billion through its tie-up with local investment platform LOGOS. This raised the gross asset value of its mandate with Logos to more than A$5 billion. In December, ADIA forged an agreement with Greystar Real Estate Partners to create a GBP2.2 billion platform to develop build to rent housing in London and its surrounding commuter towns.
ADIA has gained from its pre-pandemic investments in logistics real estate ventures, which include multi-billlion dollar platforms formed with Prologis in China and LOGOS in Australia. Indeed, the segment was to become a hot target for SOIs in 2021 as the global lockdown fuelled e-commerce and, in turn, created demand for warehousing and last-mile deliveries – particularly in Asia.
ADIA is also moving beyond the more conventional investment methods, looking at radical innovations that might disrupt institutional investment management such as machine learning and artificial intelligence. Since September 2020, ADIA has built a team of high-profile mathematicians and physicians to run its Science Lab out of Abu Dhabi, recruited from leading hedge funds and global academic institutions.
