Abu Dhabi sovereign fund has most holdings in US, Europe; sees significant potential there

By Adam Schreck, AP
Monday, January 11, 2010

Abu Dhabi fund sees long-term potential in West

DUBAI, United Arab Emirates — A top official for the world’s biggest sovereign wealth fund said Monday the bulk of its holdings are still in the U.S. and Europe, and that the Abu Dhabi fund sees “significant, long-term investment potential” in both regions despite the global downturn.

The Abu Dhabi Investment Authority’s managing director said “many substantial risks” remain as the global economy struggles to recover, however. Among the threats he cited are policies that could restrict cross-border investments by big overseas investors such as ADIA.

“The world economy is still in a fragile state, and we must not jeopardize its recovery and future economic growth by building barriers to investment and shared success,” Sheik Ahmed bin Zayed Al Nahyan said.

The rare comments were made in an interview with German business daily Handelsblatt published Monday. ADIA provided a transcript of the interview to The Associated Press.

ADIA is the largest of several investment vehicles Abu Dhabi uses to manage its vast oil wealth. Analysts believe the fund is the world’s largest sovereign wealth fund, with estimates of its holdings ranging from less than $400 billion to $875 billion and up.

The fund is controlled by the ruler of Abu Dhabi, the capital of the United Arab Emirates and holder of nearly all the country’s oil reserves. The UAE is the world’s third-largest oil exporter.

ADIA officials rarely discuss the fund’s investments, and have not revealed the size of its holdings — a practice Al Nahyan upheld. He reiterated comments made earlier by Abu Dhabi’s ruler, who also serves as president of the UAE federation, that high-end estimates of ADIA’s size are exaggerated.

Al Nahyan, a member of the ruling family, said 35 to 50 percent of ADIA’s investments are in the United States. Europe accounts for 25 to 35 percent of its portfolio. The rest is spread between Asia and other emerging markets.

Like many individual investors saving for retirement, ADIA’s holdings primarily include a mixture of stocks and fixed-income assets such as government bonds. It also has put its money in real estate, private equity and other investments such as hedge funds, Al Nahyan said.

The Emirates, like other Arab Gulf states, is a major buyer of U.S. Treasury bills. Al Nahyan indicated that is unlikely to change.

“U.S. Treasuries are still the most liquid benchmark bonds in the world and will remain an important diversification tool,” he said.

Al Nahyan said risks to economic recovery include high government deficits and unemployment, as well as what he described as “protectionism” that could stifle the flow of money between countries.

Sovereign wealth funds such as ADIA have come under attack from critics in the West who fear the funds’ investments could be politically motivated and give foreign governments too much control over prized companies.

Al Nahyan declined to provide details on ADIA’s legal dispute with Citigroup Inc.

In December, Citi said ADIA was accusing it of “fraudulent misrepresentations” over the fund’s $7.5 billion investment in the U.S. banking giant. ADIA has vowed to fight for its “legal rights” as it seeks compensation or an exit from the deal.

will not be displayed