ADQ uses dividends to fund infrastructure push

• Prefers infrastructure over tech
• Looking abroad for deals is ‘mainstream’
• ADQ behind 22% of 2024 non-oil GDP

Abu Dhabi’s sovereign wealth fund ADQ is funding its growing infrastructure portfolio mainly from dividends and cash generated by companies it already owns, its chief executive said.

The self-financing strategy is a shift for the historically domestic-focused fund which is beginning to look abroad for new deals.

Established in 2018 as Abu Dhabi Developmental Holding Company and rebranded as ADQ in 2020, the nearly $300 billion fund is the emirate’s third major sovereign investor after Abu Dhabi Investment Authority (Adia) and Mubadala. 

“In our early days, we were seeded with assets which were giving us cash returns – and so those assets today are our main source of capital,” Mohamed Hassan Alsuwaidi, UAE minister of investment and ADQ’s managing director and group CEO, said.

“We’re going to continue to capitalise on the existing portfolio to create new investment opportunities.”

While Adia manages the emirate’s oil windfall globally and Mubadala is recognised for international investments across infrastructure, private equity and technology, ADQ was created to transform Abu Dhabi’s domestic economy by building and consolidating its critical sectors.

Today the fund serves as the holding company for more than 25 national champions across energy and utilities, transport and logistics, food and agriculture, healthcare, financial services, and real estate.

A ‘measured’ international approach

As global demand for infrastructure investment rises, ADQ is eyeing opportunities overseas.

“What was previously opportunistic in terms of international [deals] is now becoming more mainstream,” Roderick Mathers, senior executive director at ADQ, said.

“We’re looking internationally a lot more. It will be gradual… it will be measured.”

The executives were speaking at Abu Dhabi Finance Week earlier this month, offering a rare, candid window into the fund’s thinking.

This year, the fund agreed to a $25 billion investment framework with US-based Energy Capital Partners to develop new power generation and related infrastructure.

ADQ has also signed an MoU with the World Bank’s private-sector arm, the International Finance Corporation, to explore co-investment opportunities. The fund backs international deals through joint ventures and investment partnerships.

Alsuwaidi said ADQ assesses asset valuations as if it might exit within five or ten years, but often plans to hold its businesses ”for a very long time”. 

“We’re thinking about generational [assets]. Our power company, Taqa, we’ve owned for 25 years. We’re probably going to own it for another 100 years.”

Alsuwaidi said ADQ is sticking to infrastructure instead of following Gulf peers into technology sector bets. A recent ADQ white paper, citing external data, estimates at least $100 trillion in global infrastructure investment will be needed by 2040.

Average annual returns for infrastructure funds were around 11 percent from 2016 to 2022, with only a slight easing expected in the coming years.

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From 2019 to 2024, ADQ’s portfolio companies achieved an average annual profitability improvement of 25 percent, Mathers said.

Last year, the fund contributed 22 percent of Abu Dhabi’s non-hydrocarbon GDP.

As ADQ looks abroad, Alsuwaidi said perceptions of Abu Dhabi are also shifting: “They [sometimes] call it ‘Abu Dubai’.” 

“[But] Most people today versus 10 years ago know Abu Dhabi a lot more than they used to. Dubai used to be a stronger brand. I would say Abu Dhabi, especially in the financial world, has become [strong].”

He said first-time visitors are often surprised by what they find.

“I think what [visitors] tell us and what they’re thinking are two different things. What they tell us is they didn’t expect to see the shiny buildings. I think what they’re thinking is they didn’t think we were so educated and capable… but, we’re being presumptuous in that,” he said with a smile.