Abu Dhabi-based sovereign wealth fund ADQ kicked off the new year forging two global investment partnerships, as the fund seeks to boost its influence in emerging markets by deploying capital in critical areas such as infrastructure and urban development.
The Gulf investor said on 12 February that it has signed a Memorandum of Understanding (MoU) with International Finance Corporation, the World Bank’s private finance unit, to explore co-investment opportunities in sectors such as agriculture and healthcare infrastructure in developing countries.
It came less than a week after it signed a separate MoU with Vietnam’s government-owned sovereign investor, State Capital Investment Corporation (SCIC), to together identify and invest in areas critical for Vietnam’s economic development.
ADQ was known as Abu Dhabi Developmental Holding Company (ADDH) when it was established in 2018 but rebranded to its current name in 2020. Consultancy, Global SWFs, estimates it has $249 billion in assets under management.
While it is a relatively young sovereign investor, it has had an outsized impact particularly in emerging market countries. It invested $35 billion in Egypt last February and acquired the rights to develop a prime coastal area, Ras El-Hekma. The Egyptian prime minister Mostafa Madbouli hailed it as the biggest foreign direct investment in the nation’s history.
The deal helped alleviate the foreign reserves crisis Egypt has been in since 2023 and paved the way for the nation to eventually secure a bigger $8 billion loan program from the International Monetary Fund in March 2024.
Elsewhere, ADQ also offered to shore up the Turkish economy, providing up to $8.5 billion of earthquake relief financing bonds after southern and central Turkey was struck by catastrophes in February 2023, as well as a $3 billion credit export facility for Turkish companies.
ADQ’s deal with SCIC this week marks its first partnership with a Southeast Asian state government entity, although it has already been a prolific venture capital investor in the region. It created an externally managed venture program in 2020, which aims to invest in Indian and Southeast Asian startups and attract them to set up shops in Abu Dhabi.
Trade between the United Arab Emirates and Vietnam reached $4.7 billion in 2023 and almost $4.5 billion in the first eight months of 2024, representing a 45 per cent surge year on year. Mohamed Hassan Alsuwaidi, ADQ managing director and group CEO said the deal with SCIC will strengthen bilateral ties.
New capital flows
According to a summary of a December board meeting last year, chair of ADQ Sheikh Tahnoon bin Zayed Al Nahyan – who also oversees Abu Dhabi Investment Authority and is the deputy ruler of Abu Dhabi – “emphasised ADQ’s pivotal role as a catalyst for Abu Dhabi’s economic growth and the expansion of international investment opportunities”.
ADQ currently has over 25 portfolio companies and operations across more than 130 countries. They are categorised into what the fund calls “economic clusters”, including priority sectors (energy and utilities; food and agriculture; healthcare and life sciences; and mobility and logistics) and emerging sectors (financial services; tourism, entertainment and real estate; and sustainable manufacturing).
The so-called growth market capital is experiencing an incredible boom, evidenced by the fact that nearly all new SWFs came from nations between the G7 and the more frontier markets, ADQ said in a research paper last December. ADQ itself is one of them.
But the important change is these investors are no longer satisfied with just the strategy of buying safe assets like US Treasury bonds which during periods of low interest rates yielded sub-optimal returns.
The fund sees itself as operating in a “polycentric world”, characterised by the fact that global capital flows are coming from and being directed to an increasingly diverse set of destinations.
“… capital from growth markets, which once went into government securities in developed markets, is now being directed toward investments much closer to home,” the paper said. “This use of development capital creates growth opportunities in those markets which in turn attracts global capital – whether it is portfolio flows or FDI flows.”
ADQ encouraged growth markets to further standardise their market and economic operations, such as by implementing a flexible exchange rate system, demonstrating trade openness and more closely monitoring investor sentiment.
“At the end of the day, capital flows to where it is treated well,” the paper said.
