Quantitative strategies experienced pronounced swings throughout the year. The opening months brought favourable conditions for systematic cash equity managers, who capitalised on heightened stock dispersion and volatility triggered by US tariff announcements. Strategies across short, medium, and long-term time horizons delivered robust gains during this period. These strategies faced challenges during the summer and again late in the year, when they were caught offside by sudden factor rotations and a speculative rally in lower-quality assets which pressured short positions. Against this backdrop, the Alternative Investments Department (AID) sought to capitalise on these drawdown periods to increase allocations at attractive entry points.
CTAs and similar systematic trend-followers faced a difficult first half, recording substantial losses as whipsawing markets reversed established trends on multiple occasions. Uncertainty around AI-related capital expenditure in January and the US tariff rollout in April—both major catalysts of volatility—disrupted positioning across commodities, currencies, and equity indices. The second half brought much-needed stability, allowing managers to reverse earlier drawdowns with strong gains from equity and precious metals trades.
Discretionary equity managers faced headwinds early in 2025 but delivered strong results as the year progressed. Enthusiasm surrounding AI applications and increased defence sector spending provided tailwinds, particularly in the second and third quarters. While the persistent equity rally complicated short-selling activities, market-neutral portfolios were able to extract significant alpha from security selection.
Macro strategies thrived in 2025, skillfully navigating an environment characterised by policy uncertainty and shifting macroeconomic narratives. Managers who correctly positioned for yield curve steepening, dollar weakness, and equity market strength reaped substantial rewards. Commodity exposure further enhanced returns across the year.
Credit strategies also delivered positive results, with both corporate and structured credit managers benefiting from widening dispersion among issuers and sectors, in an environment where spreads generally compressed. Relative value approaches capitalised on the year's elevated volatility, identifying and exploiting mispricings across related instruments and markets.
AID delivered strong absolute returns to ADIA's total portfolio in 2025, with minimal correlation to equity market movements. The Department's thoughtfully constructed diversification proved its value: strategies that led performance in the early months were complemented by others that excelled mid-year, while the year-end saw positive contributions across the entire platform.
AID continued to enhance its structuring by expanding the Department’s investments in a managed account platform. The platform onboarded additional existing AID relationships while also directly integrating some new managers, enhancing both capital efficiency and operational flexibility.
AID demonstrated its ongoing commitment to talent development in 2025 through strategic hires of experienced professionals, internal training programmes, and the cultivation of emerging talent through the UAE national graduate programme.
As it enters a new year, the Department’s mandate remains clear: deliver attractive absolute returns through exposure to uncorrelated liquid alternative strategies, providing meaningful diversification for ADIA's broader portfolio. AID will also continue to build in 2026 on established partnerships with top-tier managers while actively pursuing opportunities to access top talent and innovation across the hedge fund landscape.
