Global markets in 2024 were a study in contrasts, in which economic, earnings, and technology-related optimism propelled risk assets to their second consecutive year of significant gains, even as geopolitical and structural risks mounted.
Investors entered 2024 with tempered expectations amidst concerns about elevated equity valuations and the impact of persistent inflationary pressures on the trajectory of interest rates. However, as the year unfolded, inflation moderated while key economic metrics including employment, consumer expenditure, and GDP growth remained resilient. This backdrop proved conducive for corporate earnings. In the second quarter, almost 80% of S&P 500 companies exceeded earnings per share (EPS) expectations.
As in 2023, momentum continued to drive markets higher. This was most pronounced in technology stocks, where hopes of an AI-driven revolution in growth and productivity largely overshadowed valuation concerns. However, unlike the previous year, investors also increasingly sought value in other sectors, including financial services, healthcare and industrials.
U.S. equities led global gains, followed by Japanese equities, as the MSCI Index ended the year 19% higher. European equity markets enjoyed a confident start but concerns over the pace of the region's economic recovery later dampened returns, resulting in a modest year-end performance. Chinese equities gained strength in the final months of the year, supported by improving economic prospects and targeted stimulus measures.
Fixed income markets remained volatile in 2024, with diverging global growth, sustained inflation and shifting central bank policies contributing to rising long-term yields. Credit markets, by contrast, benefited from the robustness of the corporate sector, with credit spreads narrowing significantly.
Against this backdrop, ADIA’s diversification, agility and emphasis on total portfolio management enabled it to deliver a strong performance throughout 2024.
In recent years, ADIA has implemented a scientific approach across the organisation and has invested significantly in its in-house quantitative and data analysis capabilities. This has allowed for more dynamic adjustments at the total portfolio level to capitalise on time-bound opportunities, while also enhancing ADIA’s ability to capture long-term trends.
By gaining a deeper understanding of the total portfolio's risk-return dynamics, ADIA has broadened its investable universe within certain asset classes and empowered its investment teams to pursue these opportunities within clear guidelines.
One example in 2024 was ADIA’s dynamic approach to private credit, capitalising on growing market demand for alternative and flexible funding. Operating within ADIA’s overall target exposure, various investment teams were active in capturing emerging opportunities aligned with their individual strategies and objectives.
Meanwhile, ADIA’s approach to parts of its actively managed equities portfolio also evolved, by expanding its ability to invest flexibly across a broader spectrum of equity and equity-related strategies.
As at 31 December 2024, ADIA’s 20-year and 30-year annualised rates of return, on a point-to-point basis, were respectively 6.3% and 7.1%*, compared to 6.4% and 6.8% in 2023. As always, these returns can be influenced by the combination of years exiting the calculations together with the inclusion of new data from the latest financial year. This underlines ADIA’s preference to focus on long-term trends.
*Performance is measured based on underlying audited financial data and calculated on a time-weighted basis. Performance for 2024 remains provisional until final data for non-listed assets is included.
After two years of exceptional equity market performance, expectations at the start of 2025 were leaning toward more moderate gains and increased caution among investors.
Market concentration has reached historically elevated levels in the U.S., with the top 10 stocks accounting for almost 40% of the S&P 500’s market capitalisation. This poses challenges for portfolio managers seeking diversification while avoiding overexposure to these dominant names.
As 2025 unfolds, the global economic backdrop is likely to remain complex. Inflation, which has been on a downward trajectory, is expected to stabilise or edge slightly higher in 2025, even as growth remains subdued. This presents a dilemma for central banks, which may be encouraged to adopt more accommodating monetary policies to support economic activity, even at the risk of slightly higher inflation.
This growth-focused mindset is likely to align with a broader effort to address decades of underinvestment in infrastructure. Governments worldwide are increasing spending on projects to modernise ageing systems and support long-term growth, including in transportation, energy, digital networks, and other areas. With annual infrastructure investment needs projected to reach trillions of dollars, this presents opportunities for investors to participate in transformative projects that not only generate financial returns, but also support long-term structural needs.
Technology and particularly the rise of artificial intelligence will remain at the forefront of public consciousness. In coming years, the advancement of these technologies' capabilities, and their increasing integration into the fabric of the global economy, is poised to transform society. By driving efficiencies and unlocking new possibilities, they promise to revolutionise how we work, communicate, and address complex global challenges.
At ADIA, we accept that uncertainty and change are inevitable features of the investment landscape, where opportunities are often fleeting. In this context, technology and the effective use of data are critical enablers for navigating these challenges effectively.
In recent years, ADIA has applied technology to support an increasingly systematic, data-driven approach throughout the organisation.
ADIA’s Quantitative Research & Development team plays a key role in the dynamic asset allocation process while developing and implementing systematic market-neutral and directional investment strategies. Meanwhile, ADIA’s Core Portfolio Department applies quantitative methodologies to efficiently manage passive public equity and fixed income exposures, optimise rebalancing decisions and meet the liquidity and funding requirements of the total portfolio.
This commitment to scientific rigour is also reflected in ADIA's integrated middle and back office, which now provides highly detailed insights into the total portfolio, enabling more informed decision-making and efficient execution on opportunities.
These are among many enhancements that are now contributing to ADIA’s overarching objective of delivering consistent returns that are more independent of global economic or market conditions.
In addition to continuously enhancing its in-house capabilities, ADIA remains acutely aware that success in a rapidly changing world requires not only internal expertise but also strong external partnerships. These relationships have long been integral to ADIA’s success and remain so today, providing specialised skillsets, insights and access to unique investment strategies that support its objectives.
Looking ahead, ADIA is now entering a new phase in its evolution, shifting from laying foundational capabilities to refining and implementing data-driven investment decisions. Over the decades, it has consistently demonstrated a willingness to innovate and adapt, embracing change even when it has required bold action and new ways of thinking.
As we stand on the cusp of a new technology-driven era, we remain confident in ADIA's ability to fulfil its mission with resilience and purpose by skilfully navigating the many opportunities and challenges that will inevitably emerge.
