Operational Review

Our core belief is that the investing landscape is evolving more rapidly than at any point in history, and will continue to do so.

To succeed in this increasingly dynamic environment, ADIA has pursued a more systematic approach to identifying and capturing opportunities. This has involved building capabilities in key areas, such as artificial intelligence, data and analytics, and instilling a more science-driven ethos throughout the organisation.

While this represents part of ADIA’s overarching philosophy, it is supported by a number of other more specific, if no less important, initiatives aimed at driving its future success.

One of ADIA’s core strengths has always been its ability to combine a long term, global outlook with deep specialisation across multiple asset classes. In 2021, ADIA continued to prioritise efforts to leverage the full power of its total portfolio by enhancing its ability to identify risks and opportunities at an aggregate level, and to act upon them. This enabled the development of insights that might otherwise be overlooked when viewing the world in a more narrowly-focused way.

We expect this total portfolio perspective to be a key driver of future returns. It also enhances our ability to assess ADIA’s organisational requirements, increase internal agility and identify efficiency gains. In an example of this approach in action, ADIA reorganised a number of departments in 2021.

The Core Portfolio Department (CPD) was created to be the central implementation and execution function for ADIA’s total portfolio. CPD is responsible for implementing ADIA’s benchmark exposures across equity and fixed income markets; managing ADIA-wide Treasury related activities; and executing all equity, fixed income, money market and currency trades. Prior to the formation of CPD, these activities were managed across four separate departments and multiple teams. Combining these activities together into one department, supported by robust data and analytics and a systematic approach to decision making across markets, CPD delivers agility and efficiency in implementing asset allocation, treasury and trading decisions.

Meanwhile, the Central Investment Services Department (CISD) was created through the combination of functions from the former Accounts Department and Investment Services Department, while also centralising investment support functions from the Core Portfolio, Equities, Fixed Income and Alternative Investments departments.

Both new departments play a central role in supporting ADIA’s total portfolio approach: in CPD’s case, by allowing for more efficient, flexible trading and rebalancing for ADIA, while CISD creates a single point of visibility for the total portfolio and efficient investment support activities across the organisation.

In parallel to these structural changes, ADIA made substantial progress in simplifying systems and processes, to increase its ability to act quickly when it identifies fast-moving opportunities.

This multi-year and ongoing effort includes increasing the autonomy of front-line managers, consolidating ADIA’s technology systems through an ongoing middle and back office optimisation programme, and simplifying internal processes and governance structures.

Together these initiatives have combined to create more streamlined teams, with a corresponding reduction in overall headcount. In parallel, ADIA has reallocated resources to areas of future growth, with significant recruitment activity in various parts of the organisation, such as in private markets and systematic quantitative investing, which will continue in 2022.

In line with a more systematic, science-based approach, ADIA has been broadening its mix of internal skill-sets and capabilities throughout the organisation.

One example is ADIA’s Research & Development Lab and Factory, which comprises highly-skilled specialists with backgrounds in areas such as artificial intelligence, machine learning, big data, high performance computing and applied mathematics.

A key feature of the ADIA R&D Lab and Factory is its highly collaborative, peer-reviewed and process-driven approach, combined with extensive testing. The team has already generated a range of new investment ideas with encouraging results, and its work is also contributing to the evolution of ADIA’s overall investment process. As a result, ADIA plans to continue to grow its capabilities in this area in the coming years.