Abu Dhabi Investment Authority (ADIA) has assets of about $650 billion and is growing at 10% per year or so. It is apparently the largest SWF. This piece in the IHT on its investment in Citigroup covers many of the points that we have been discussing in this space over the last months as essential (and overdue) in the recycling of current account surpluses into countries running deficits. IHT:

By agreeing to purchasing a $7.5 billion stake in the faltering banking giant Citigroup, the secretive, government-controlled Abu Dhabi Investment Authority is breaking with tradition. As the largest sovereign wealth fund in the world, with assets estimated at $650 billion, it poured money in the past into low-return, low-profile investments or small emerging market deals, unlike its flashy emirate neighbor, Dubai.

But a falling dollar and a growing cash pile are spurring Abu Dhabi to change strategy, according to analysts, economists and deal makers, who said that more big-ticket deals might be ahead. Flush with cash from its oil exports, Abu Dhabi turned to Wall Street, using a complicated transaction late Monday to buy 4.9 percent of Citigroup, acquiring high-yield, convertible stock that must be exchanged for common stock between March 2010 and September 2011.

Abu Dhabi is the largest oil producer of the seven United Arab Emirates and is eager to spend its petrodollars.

“They’re watching them depreciate, and that’s driving their anxiety,” said Marc Ginsberg, a former U.S. ambassador to Morocco who has worked with other emirates. Abu Dhabi also has an interest in making sure the U.S. economy does not slow further, Ginsberg said, which helps to make investments like the Citigroup stake more attractive…

With the creation of a new investment arm, Mubadala Development, in October 2002, Abu Dhabi started to invest directly in projects like telecommunications systems in Nigeria and power plants in Algeria. Recently, Mubadala purchased 8 percent of the U.S. chip maker Advanced Micro Devices and 7.5 percent of the investment fund Carlyle Group. The larger Abu Dhabi fund bought a 9 percent stake this year in Apollo Management, a private equity firm run by Leon Black, for an undisclosed sum.

We should expect to see a lot more of this activity over the coming months, both from SWF’s in the Middle East, and China as well.

This entry was posted on Wednesday, November 28th, 2007 at 4:53 am and is filed under business, China, General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.