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ADIA: Infra market ‘subdued’ in 2011

But the $627bn sovereign wealth fund’s infrastructure team still managed to have an ‘active’ year, with acquisitions including stakes in Gassled, Norway’s gas pipeline network, MAp Airports and Thames Water. ADIA has also merged its real estate and infrastructure divisions.

The Abu Dhabi Investment Authority (ADIA) – currently the largest state fund in the world with approximately $627 billion of assets, according to the Sovereign Wealth Fund Institute – found the infrastructure market to be “subdued” in 2011, but pointed out it still managed to have an “active” year on the acquisitions trail.

“Overall activity in the [infrastructure] market remained subdued during 2011 compared to the peak of the market in 2006-2008, with only a handful of assets valued at $2-$5 billion-plus (enterprise) value being traded,” the sovereign wealth fund pointed out in its 2011 annual review, adding: “Australia and the UK were two of the more active markets by value of completed infrastructure deals over the period.”

ADIA saw the bulk of opportunities last year coming from the private sector, “with corporate owners selling off non-core assets either to pay down debt or to redeploy capital in core activities. There were also a small number of infrastructure privatisations that either launched or successfully completed during the year, including in Spain and Australia”.

Still, the sovereign wealth fund’s infrastructure team managed to have a busy 2011, participating in the consortium that bought a 24.1 percent stake in Gassled – Norway’s gas pipeline network – as well as acquiring just over 5 percent of MAp Airports – which holds stakes in Sydney, Brussels and Copenhagen airports – and a 9.9 percent holding in Thames Water, the UK’s largest water and wastewater company. 

This year, ADIA was part of a Macquarie Infrastructure and Real Assets-led team that bought a major German network of gas pipelines from German utility E.ON for €3.2 billion.

ADIA is targeting investments in “large scale, core infrastructure assets in developed markets alongside strong partners,” it said in its 2011 annual review, pointing out it can also take minority positions in listed companies with attractive long-term growth prospects.

As reported yesterday, ADIA decided to combine its Real Estate Department with its Infrastructure Department as part of a wider effort to streamline and integrate various departments. ADIA explained the merger sought to improve the “organisational efficiency and alignment of investment team resources”.

The merger makes the enlarged real estate and infrastructure departments responsible for between 6 percent and 15 percent of ADIA’s assets under management – between 5 percent and 10 percent on the real estate side and between 1 percent and 5 percent on the infrastructure side.

ADIA, which was established in 1976 and currently employs 1,275 staff, reported a 20-year annualised return of 6.9 percent in the year to 31 December 2011, a dip from the 7.6 percent it recorded a year earlier. Over a 30-year period, the sovereign wealth fund recorded an annualised return of 8.1 percent, the same as the year before.