General partners will be pleased to know that the world's largest sovereign wealth fund manager, and one of the world's largest cornerstone investors, the Abu Dhabi Investment Authority (ADIA), is taking significant strides to be more transparent.
More than 30 years after ADIA's inception, the organisation controlled by Abu Dhabi's ruling Al Nehayan family, last month put out its first ever press release on real estate.
After more than six months of searching, ADIA has hired a global head of real estate. The arrival of JPMorgan real estate finance managing director Bill Schwab as the fund's new global property chief was announced eight days into the New Year, and with that, ADIA's less-than-one-year old communications team found itself in the unchartered position of responding to media calls on the sector.
The opening of the doors by ADIA will initially enable the global investment community to learn about Schwab's remit. He takes over, with a new title, from former chief investment officer Mark Burton, who joined compatriot wealth fund manager the Abu Dhabi Investment Council in the summer of 2007.
According to Majed Al Romaithi, executive director for real estate at ADIA and the man charged with carrying the operational mantle between Burton's departure and Schwab's arrival, his successor would be charged with “guiding ADIA's investment strategy in this exciting and constantly evolving sector”.
Al Romaithi will line manage Schwab. He represents one of three layers of authority within ADIA's organisational structure between Schwab and the ruling Al Nehayan family. Al Romaithi reports to ADIA managing director Sheikh Ahmed bin Zayed Al Nehayan who sits on, and reports to, ADIA's board of directors, dominated by the Al Nehayan family.
Schwab's autonomy to make unchallenged decisions will become evident as ADIA's investment strategy unfolds. The wealth fund manager is still playing its cards close to its chest on investment targets.
But for the first time, ADIA has loosened its grip slightly. One nugget of information previously undisclosed, is that ADIA's neutral benchmark for funds invested in real estate – both direct and indirect – has been between 5 percent and 10 percent of total funds.
Additionally, GPs might be interested to know that depending on whether ADIA goes bullish or bearish in any given year, those percentages could be pushed out in either direction.
ADIA has yet to reveal just how much equity it currently manages, with previously reported figures ranging as high as $875 billion and as low as $450 billion. But GPs can now at least estimate that real estate has anything between $87.5 billion and $22.5 billion committed to it. Even if you take the lower possibility, it's a fairly sizeable commitment to the sector.
And while ADIA has traditionally ticked the clichéd sovereign wealth fund box of buying high profile, trophy assets, such as the Lanesborough Hotel in London or the mixed-use Sturegallerian in Stockholm, it has also invested heavily behind the scenes too, not least as a cornerstone investor in international funds.
While there is no danger of ADIA putting out an annual report anytime soon, GPs should expect to attain more information going forward. Placement agents have yet to start gleefully rubbing their hands at the prospect of new business, suggesting Schwab's appointment may be more of a maintenance role than a directional one.
However, considering the sheer size of ADIA's equity commitment to real estate it is understandable that an experienced set of hands was essential to maintain high performance targets. As well as JP Morgan, Schwab also worked at Deutsche Bank and Goldman Sachs.
Sovereign wealth funds have been paraded as the potential white knights to the faltering global real estate market. Whether that materialises will only become evident when outfits like ADIA start to roll out their strategies. More importantly though, these guys are keen to let us know a little bit more of their intentions now.