The Abu Dhabi Investment Authority, the 46-year-old state-owned investor with an estimated $800 billion assets under management, is planning to set up a specialist independent research unit. ADIA Lab will operate as a standalone entity with broad research goals to explore the latest trends and technologies in data and computer sciences.
Projects and research programmes will not be designed specifically to enhance and support ADIA’s investment programme, which already has its own 50-person in-house team of quantitative researchers and developers. ADIA Lab’s research agenda will be set by an advisory board of scientists, independent of ADIA, and a key rationale for the new unit is to nurture an innovative IT ecosystem in Abu Dhabi as the economy diversifies from fossil fuels.
Still, that won’t rule out the research, which will span data science, AI, machine learning and quantum computing, all highly applicable to the global trends set to drive returns in the future like the transition, blockchain, financial inclusion, cybersecurity or space, informing ADIA’s investment processes.
ADIA Lab marks another step in the giant investor determinedly boosting its technical prowess and application of technology. Speaking to Top1000Funds.com last year Jean-Paul Villain, ADIA’s director of strategy and planning, said ADIA had missed out on opportunities to generate alpha because of a lack of investment in big data and AI.
Over the last 18 months ADIA has begun investing in different kinds of quantitative approaches staffed by an in-house team of quants, physicists, AI and computer experts drawn from hedge funds and academia. They collect, clean and test data to apply across the portfolio from long short equity allocations to tactical positions and facilitate access to the best managers – around 55 per cent of the portfolio is externally managed.
Perhaps one of the most important benefits to ADIA will come from the investor’s proximity to ADIA Lab. ADIA Lab may not be housed in the same high rise building as ADIA, but investment staff will be able to interact and collaborate with researchers, academics and global experts in data and computer science and further embed a scientific mindset through the organization.
ADIA Lab will also focus on projects that could lead to the creation of start-ups. This doesn’t mark the beginning of ADIA investing in start-ups like some other state-owned investors, however. For example, in a pioneering strategy, Singapore’s Temasek creates and seeds its own innovative companies from scratch, effectively building its own strategic capabilities rather than investing in entrepreneurs in the space. ADIA does invest in start-ups of a certain scale through a venture capital allocation in its private equity portfolio, but doesn’t tend to invest in the UAE.