ADIA has significantly increased its focus on technology and the use of AI, building out a quant research and development team of more than 100 people, and launching ADIA Lab which engages in applied research in data science, artificial intelligence, machine learning, and high-performance and quantum computing, across all major fields of study.
The Abu Dhabi Investment Authority (ADIA) is positioning for artificial intelligence to profoundly impact innovation, productivity and ultimately, economic growth. The technology has entered mainstream terminology and its transformative potential has come into sharp focus, said Hamed bin Zayed Al Nahyan, managing director, ADIA, writing in the investor’s 2023 Review.
On one hand, it is making markets increasingly efficient, and enhanced returns harder to achieve. On the other, technology is unleashing a wave of innovation that promises to deepen the opportunity set for those investors with the resources and agility to capture them according to Abu Dhabi’s sovereign wealth fund which manages an estimated $1 trillion.
He writes that technology will continue to rise up the global agenda as the emergence of increasingly powerful tools create new opportunities for those able to grasp them.
“At ADIA, we believe that several interconnected, global transitions are currently underway: technological, economic, and energy-related, among various others. In recent years, we have sought to integrate technology into the fabric of our organisation. As part of this, we have embraced new tools to enhance our efficiency and internal agility, and separately have been increasing our internal quantitative skillsets.”
building out the quant team
ADIA’s integration of AI into its own investment processes is visible in the role out of a systematic, science-based approach to investing where the Quantitative Research & Development team (QRD) develops and implements investment strategies through a peer-reviewed scientific process.
QRD now counts around 100 experts in areas from quantitative analysis to data science and AI, playing a pivotal role in evolving ADIA’s asset allocation process, making it increasingly responsive to fast-moving opportunities.
Data analytics and quantitative investment capabilities across the organisation is particularly manifest in the core portfolio and fixed income teams where the focus is on finding new tools to analyse and derive insights from data.
ADIA’s middle and back-office teams have been engaged in an ongoing project to enhance and refine how data is managed and presented, to help ensure the organisation always has the most comprehensive and timely data possible to support decision-making, states the Review.
Other pivotal technology initiatives at the fund include ADIA Lab, an independent research institution focused on data and computational sciences. It marked its first full year of operation in 2023, making numerous contributions to Abu Dhabi’s growing digital ecosystem.
ADIA Lab operates at arm’s length from ADIA and is led by an advisory board of global thought leaders in data and computationally-intensive disciplines, including winners of the Nobel, Turing, Godel, Rousseeuw, Gordon Bell, and other awards.
ADIA Lab is engaged in basic and applied research in data science, artificial intelligence, machine learning, and high-performance and quantum computing, across all major fields of study. This includes exploring applications in areas such as climate change and energy transition, blockchain technology, financial inclusion and investing, decision making, automation, cybersecurity, health sciences, education, telecommunications, and space.
The inaugural ADIA Lab Symposium held in Abu Dhabi in November attracted a range of globally-renowned scientists for a two-day event exploring how data science, blockchain, high performance computing and AI could address challenges in climate and health sciences.
Elsewhere ADIA Lab has partnered with Spain, establishing its European headquarters in Granada. As part of the agreement, the unit has launched five research programmes with Spanish universities and research institutions. Key areas of focus include analysing data and complex systems in public health, the environment, and the digital economy, as well as high-performance computing and the development of artificial intelligence.
In another initiative ADIA Lab Best Paper Awards have invited researchers to address complex challenges through the application of data science.
Total portfolio investment
The Review also noted progress in total portfolio investment. ADIA seeks to emphasise total returns at a portfolio level in contrast to the more traditional approach of tasking individual asset classes to outperform benchmarks. This has meant the investor has steadily increased its exposure at a total portfolio level to areas in which it holds natural competitive advantages, particularly private assets.
For example, the private equity allocation has grown to 12-17 per cent of ADIA’s total portfolio in comparison with 10-15 per cent in 2022.
“In private equity ADIA has leveraged its often decades-long relationships in the sector to broaden and deepen how it accesses the sector, and ultimately enhance returns,” wrote Hamed bin Zayed Al Nahyan.
At a total portfolio level, ADIA has also expanded assets managed internally from 55 per cent in 2022 to 64 per cent in 2023. Most of the push into internal management has happened in indexed equity exposures in the core portfolio department.
“This provides ADIA with additional flexibility to optimise its investment activities and implement asset allocation decisions more efficiently. In parallel, ADIA is continuing to expand and deepen relationships with leading external managers across various asset classes,” stated the Review.
The Review marks the allocation to developed equities between 32- 42 per cent; emerging market equities (7-15 per cent) government bonds (7-15 per cent) credit (2-7 per cent) financial alternatives (5-10 per cent) real estate (5-10 per cent) infrastructure (2-7 per cent) private equity (12-17 per cent) small cap equities (2-7 per cent) while the cash allocation is between zero to five per cent.
Promoting home grown talent
ADIA has also focused on developing its talent pool – a key aim since inception in 1976. The investor supports talented UAE Nationals early in their careers with scholarships at prestigious local and international universities – typically in science, technology and mathematics related subjects.
It then encourages them to continue their academic growth in more specialised, technical areas that are becoming increasingly relevant to success in finance.
“By pursuing learning as a core skillset, ADIA is positioning its people to succeed in what is likely to become an increasingly dynamic investing landscape,” concludes the report.
