Abu Dhabi wealth fund culls Japan team, seeking new growth focus

The Abu Dhabi Investment Authority has reconfigured the way it invests in Japanese stocks, part of a wider shift by the world’s third-largest sovereign wealth fund to focus on areas with more growth potential.

The fund, known as ADIA, closed a small team that focused on Japanese equities and three portfolio managers left, according to people familiar with the matter who declined to be identified because the information is confidential.

It will continue to invest in Japanese equities but only through its external managers and as part of a passive portfolio, the people said. An ADIA spokesperson confirmed the fund had changed its approach to investing in Japanese equities but declined to comment further.

Sovereign wealth funds in the Gulf, where governments are struggling to absorb the impact of lower oil prices, have been making adjustments to generate higher yields. ADIA’s most recent report showed 20-year annualised returns were 5.4 per cent in 2018, the lowest since it began reporting them in 2008. It has almost $580bn in assets, according to the SWF Institute.

In the case of a highly developed and efficient market like Japan, ADIA concluded that outperformance proved difficult to achieve in a sustainable way, the people said. Its Japan exposure remains the same and isn’t being reduced.

The decision to close this portfolio fits into a broader strategy at the sovereign fund to reallocate resources to other areas with greater growth prospects, they said.

India has emerged as one such destination for ADIA and its counterpart in Saudi Arabia, with the two sovereign funds recently investing in the consumer businesses of of billionaire Mukesh Ambani, chairman of Reliance Industries Ltd.

New Hires
ADIA last month also appointed Stephen Malinak as global head of quantitative research and development. He joins other recent hires such as Marcos Lopez de Prado and Anders Svennesen to become part of a team that is building out ADIA’s artificial intelligence and machine learning capabilities.

Malinak was chief data and analytics officer at TruValue Labs, a San-Francisco based firm helping investment companies boost their research capabilities by using artificial intelligence.

Separately, two executives of ADIA’s real estate division left in recent months, according to the people. Pascal Duhamel, the head of European real estate investments, and Anthony Bertoldi, acting head of real estate in Asia, both departed for personal reasons, the people said.

Duhamel was hired in 2012 from Carrefour Property and was in charge of developing strategy and overseeing management of ADIA’s real estate portfolios in Europe.