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Abu Dhabi' sovereign fund targets further investment in China

Abu Dhabi Investment Authority (ADIA), one of the world’s biggest sovereign wealth funds, sees investment opportunities in China’s fixed income and real estate markets, as well as smaller Chinese companies, its managing director told China Finance.

ADIA, which has been investing in China for 25 years, has its largest exposure in listed equities, including a $2.5 billion allocation to the China A market, which lists shares denominated in renminbi, under the Qualified Foreign Institutional Investor programme, Sheikh Hamed bin Zayed al-Nahyan told the magazine.

“We remain optimistic about the outlook for China and the government’s ability to steer the country’s economic transition in a skilled and measured way,” al-Nahyan said in his first interview to date.

“Ongoing steps to liberalise the market are also promising and could allow us to invest more in areas such as fixed income.”

He told the publication that ADIA sees opportunities to partner with local businesses to invest in China’s retail and residential space while also working with local private equity funds to find openings to co-invest in small and emerging companies.

Economic growth in China could ease to 6.5 percent this year from about 6.7 percent in 2016, a government-run think tank said this month, though Premier Li Keqiang warned that the economy will face more pressures and problems in 2017.

Similarly, the International Monetary Fund on Monday raised its forecast for China’s economic growth this year by 0.3 percentage points to 6.5 percent on expectations of continued policy stimulus but also highlighted risks from record lending by state banks and high corporate debt.

“While much focus is given to GDP data, we believe this disguises the rapid growth taking place in areas such as the consumer and services sectors, among others,” al-Nahyan said.

Created in 1976 and headquartered in the oil-rich capital of the United Arab Emirates, ADIA does not disclose the total size of its assets. However, the United States-based Sovereign Wealth Fund Institute, which tracks the industry, estimates ADIA’s assets at $792 billion.

In the wide-ranging interview, al-Nahyan said he feared a period of subdued returns for ADIA globally because financial assets appeared “generously valued” at current levels.

ADIA also has concerns about the impact of ultra-low, or even negative, interest rates in some parts of the world, he said.

The fund’s latest annual review said that the 20-year annualised rate of return on ADIA’s portfolio fell to 6.5 percent in 2015 from 7.4 percent the previous year.

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