Operational Review

At ADIA, we believe the business of investing is undergoing a significant transformation, with information and data now more readily accessible than at any time in history. This, in turn, has placed a premium on investors’ ability to analyse data in innovative ways, in order to develop insights that generate financial outperformance.

With this in mind, we have identified two key priorities that will form the core of our organisational strategy in the years to come: a more structured approach to gaining actionable insights; and enhancing our organisational agility so that we can respond quickly and with purpose when opportunities emerge.

Among related initiatives in 2018, ADIA conducted a risk‑return project involving all of our investment departments to identify opportunities and constraints across the total portfolio. In what will be an annual exercise, these findings were then analysed by ADIA’s Investment Committee, enabling it to fine‑tune its investment and process‑related priorities.

In recent years, ADIA has created a number of cross‑departmental working groups and forums to foster new perspectives and support insight generation. This process has identified opportunities that reside on the fringes of different asset classes, in particular between public and private markets. By breaking down the barriers between our asset classes, we are better equipped to identify and pursue potentially attractive opportunities that might be overlooked by the broader market.

Much has been written about the benefits of big data, and ADIA is no different in recognising the potential value it can bring. With the use of custom‑made software that aligns with our long‑term perspective, ADIA is actively using advanced numerical techniques involving artificial intelligence in our portfolio construction and asset allocation. We will continue to build and grow our expertise in this area, to identify applications with the greatest promise to assist us in meeting our performance targets.

In 2018, we also cast our attention outward, completing a two‑year research exercise involving more than 20 of our global peers, to build a picture of how large organisations manage information and apply it to their decision‑making process. These findings, combined with those from more than 70 internal interviews, will help to inform how we continue to evolve as well as how we analyse and use information.

At ADIA, we recognise that competitive advantage is often fleeting. This is why we have sought to empower our investment professionals, as the experts closest to their markets, with greater discretion in how they deploy capital and risk.

In 2017, ADIA began the process of consolidating a large number of investment pools, or portfolios, into single pools. This provides our investment professionals with the flexibility to allocate funds between different asset types according to where they see opportunities.

This process continued in 2018, and our investment departments are now focused on developing further their internal capabilities and investment strategies to deliver enhanced returns from their simplified portfolios. Our Fixed Income & Treasury Department, for example, has begun scaling up its active investing, with a view to going fully active in coming years, compared with around 40% currently.

With an outlook that spans decades, ADIA spends considerable time seeking to identify the themes and trends that will influence markets in the future. One such area has been climate change, and this remained a key focus in 2018. ADIA held its annual internal Global Investment Forum in late 2017 - early 2018, entitled “Climate Change and the Potential Investment Impact”. This involved the creation of eight internal asset‑class specific task forces to consider the potential implications for ADIA and its portfolio in coming decades. It culminated with a two‑day event in February attended by more than 400 ADIA employees, where the findings and recommendations were presented.

While our investment departments routinely consider a wide range of factors in assessing opportunities, ADIA took the decision in 2018 to formally integrate climate change considerations into its investment proposal review process. Meanwhile, ADIA also worked alongside five global sovereign wealth funds (SWFs) to develop and publish the One Planet SWF Framework, which seeks topromote the integration of climate change analysis in the management of long‑term portfolios. Building on current industry best practice, the Framework aims to foster a shared understanding among long‑term asset owners around key principles, methodologies, and indicators related to climate issues. The publication of the Framework, in July, marked the culmination of six months’ work by the One Planet SWF Working Group, of which ADIA is a founding member.

Finally, ADIA continued to devote its full energy and resources into attracting, retaining and motivating its people to achieve their potential and drive ADIA’s performance. The development of UAE Nationals remained a focus as we strive to foster new generations of talent that will drive ADIA’s success in the future. In 2018, ADIA formally launched its “Fundamentals” programme for UAE National graduates, as part of its Early Career Development Framework. The programme aims to prepare our graduate trainees for a career at ADIA by taking them on a developmental journey with a variety of immersive workshops, projects and challenges to build technical and professional skills.

ADIA’s initiatives in 2018 serve as markers for our future direction, and we look forward to making further progress against our priorities in the year ahead.