ADIA merges RE and Infra divisions

The $627bn sovereign wealth fund has merged its Real Estate Department and Infrastructure Department as it seeks to streamline functions.

The Abu Dhabi Investment Authority (ADIA) has combined its Real Estate Department with its Infrastructure Department as part of a wider effort to streamline and integrate various departments.

The giant sovereign wealth fund, which is currently the largest state fund in the world with approximately $627 billion of assets according to the Sovereign Wealth Fund Institute, revealed the decision to merge divisions in its 2011 annual review, published today.

ADIA, which was established to invest funds surplus to the budgetary requirements of the government of the Emirate of Abu Dhabi, explained it had merged the departments to improve the “organisational efficiency and alignment of investment teams and resources” and that it was part of a group-wide initiative that also included the formation of four geographically-focused external equities departments.

It means the enlarged real and infrastructure departments will be 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 said: “In keeping with spirit of ADIA’s cultural values, we rolled out further initiatives during 2011 aimed at streamlining the way we operate, enhancing collaboration and ensuring that the knowledge and experience of our most senior leaders is shared across the organisation.”

In its annual report, ADIA further said the newly formed Real Estate & Infrastructure Department had focused its real estate efforts on improving the “operating fundamentals” of its portfolio. The sovereign wealth fund did not offer details of its investing strategy current but it did say it had looked to sell assets opportunistically while redeploying its capital into areas with more attractive risk-return profiles.

Continuing its emphasis on selling into the current market, ADIA said: “The strong bid for prime assets provided several opportunities to sell into the strength of the market, where we believe the pricing is being driven more by investor sentiment – specifically, robust demand for prime assets in major global cities – than underlying fundamentals.”

ADIA also said it added a number of specialists to its already deep bench of real estate professionals during the year. That continued into 2012, particularly in Europe where it hired ex-Carrefour Property chief executive officer Pascal Duhamel as head of Europe and ex-Starwood Capital Group’s global head of asset management John McCarthy as a senior portfolio manager.

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.