ADIA boosts private equity appetite after busiest year to date

The sovereign fund giant expects competition to remain fierce or even accelerate next year, as continuation funds and SPACs add to the mountain of dry powder chasing deals.

Abu Dhabi Investment Authority has increased its appetite for private equity after its busiest year in the asset class to date.

The sovereign wealth fund – which manages an estimated $649 billion, according to the Sovereign Wealth Fund Institute – raised its allocation band for private equity from 2 to 8 percent in 2019 to 5 to 10 percent last year, according to its latest annual report, published Wednesday.

ADIA completed 24 direct investments – excluding early-stage venture capital transactions – in 2020, up from 18 the previous year. Direct and co-investments represented 55 percent of its overall deployment for the year, compared with 45 percent in 2019.

ADIA’s only publicly disclosed deal last year was its $750 million acquisition of a 1.16 percent stake in Indian digital services company Jio Platforms in June, per a statement at the time. In July this year, it acquired a minority stake in software provider Dedalus from Ardian, which remains the company’s controlling and majority shareholder.

“ADIA’s private equities department… was active throughout the year and deployed more capital in total than ever before,” the report noted. “The department’s focus on Asia-Pacific was evident with the successful completion of direct investments in China and, in particular, in India where the team was able to grow its portfolio of investments significantly for the third consecutive year.”

ADIA first set out to build an in-house private equity team capable of making direct investments in 2012. In 2018, the institution hired former KKR executive Kabir Mathur to run its private equity operations for India and Southeast Asia and build its direct investment capabilities in the region. The value of ADIA’s internally-sourced direct private equity investments doubled between 2016 and 2019, Private Equity International reported at the time.

The sovereign fund expects competition for attractive companies to “remain intense or even accelerate” in 2021, it said, noting that continuation funds and special purpose acquisition companies may exacerbate the issue. Key areas of interest this year include enterprise software, pharmaceuticals, life sciences and tech-enabled payments.

ADIA’s 20-year and 30-year annualised rates of return were 6 percent and 7.2 percent respectively as of 31 December, versus 4.8 percent and 6.6 percent in 2019.

The institution’s increased appetite for private equity comes amid a wider push into private markets, with its infrastructure bracket also increasing from 1 to 5 percent to 2 to 7 percent last year. It hasn’t all been smooth sailing, with its real estate team suffering a string of senior departures, affiliate title PERE reported in May. The departure that month of Americas real estate head Gerald Fang left the fund with no permanent global or regional heads for the asset class.

– Adam Le contributed to this report.