Abu Dhabi fund shifts from hedge to index-report

Date: Monday, June 9, 2008
Author: Thomas Atkins, Thomson Reuters

Abu Dhabi Investment Authority (ADIA), the world's largest sovereign wealth fund, which bought into Citigroup (C.N: Quote, Profile, Research), will slash its hedge fund investments and increase holdings in index funds, according to a report.

ADIA increasingly favours passive investments such as funds that track the performance of a specific stock index over actively managed funds, which frequently fail to measure up, said BusinessWeek, quoting ADIA, in an article on its website.

ADIA has halved the number of hedge funds in its portfolio, the article said.

"ADIA is keen on identifying real management skills and real talent and is not prepared to pay the usual fees charged by hedge funds for strategies that can be replicated in an index," ADIA's executive director Saeed Mubarak al-Hajeri, was quoted as saying in the article.

A spokesman for ADIA was not immediately reachable.

BusinessWeek said ADIA was investing about 34 percent of its money in so-called alternative investments such as emerging markets, private equity funds, infrastructure and hedge funds.

ADIA, whose assets are estimated at $650 billion, agreed in November to buy $7.5 billion of equity units in Citigroup as the U.S. bank struggled against billions of dollars in subprime mortgage-related writedowns.

Citing ADIA data, BusinessWeek said the fund held the following positions:

Developed equities 45-55 percent

Emerging markets equities 8-12 percent

Small cap equities 1-4 percent

Government bonds 12-18 percent

Non-government bonds 4-8 percent

Alternative investments 5-10 percent

Real estate 5-10 percent

Private equity 2-8 percent

Infrastructure 0-4 percent

Cash 0-5 percent

By geographic distribution (including real estate, private equity, alternatives, infrastructure, and cash) ADIA holds:

North America 40-50 percent

Europe 25-30 percent

Developed Asia 10-15 percent

Emerging Markets 10-15 percent

(Reporting by Thomas Atkins; Editing by David Cowell)