The Abu Dhabi Investment Authority (Adia) said on Thursday it has opened an office in Hong Kong to help develop contacts and identify investments in China and other Asian markets.
The Emirate of Abu Dhabi’s sovereign wealth fund also named Dong-Sinh Ngo as its chief representative across Asia Pacific. The Swiss national will be based in Hong Kong.
Sovereign wealth funds from around the globe have been ramping up investment in the fast-growing region over recent years. Norges Bank for one has been a frequent investor in Hong Kong IPOs. This is the Abu Dhabi sovereign wealth fund’s first and, perhaps surprisingly, its only overseas presence following the closure of its London office barely a year ago.
The simple fact is that a local presence in Hong Kong is more valuable than one in London, said a source close to Adia, one of the world's biggest state investors.
Adia’s Middle Eastern peers are also active, such as The Kuwait Investment Authority, Oman Investment Fund the Qatar Investment Authority. Local SWFs such as Sinagpore’s Temasek and GIC and of course China’s CIC are deeply embedded across the region.
Adia has between 10% and 20% of its global portfolio invested in developed Asian economies. “Adia has been investing and building relationships in Asia for more than three decades, with a portfolio that spans multiple asset classes,” said Hamed bin Zayed Al Nahyan, managing director of Adia in a statement.
In Hong Kong, it agreed last year to buy stakes in three hotels, the Grand Hyatt Hong Kong; the Renasissance Harbour View and the Hyatt Regency Hong Kong.
It invested in China Pacific Insurance in 2012 during a private placement of H shares.
In South Korea its investments have included a 15% stake in STX Enpaco and the State Tower Nasam. In India Adia has invested in Greenko, Muthoot Finance; Tata Steel and SKS Microfinance.
Adia's new Hong Kong team is three-strong and led by Ngo Dong-Sinh (pictured left), formerly Hong Kong-based head of products and investment solutions at Credit Agricole’s private bank.
Now Adia’s chief representative for Asia Pacific, he reportedly left his post at Credit Agricole late last year. Prior to that, he was chief strategist for emerging markets and Asia Pacific at BNP Paribas Investment Partners.
Ngo, who is fluent in Cantonese, English, French and German, is a Charterholder from the CFA Institute.
He holds a Diploma in Private Banking from the UBS Private Banking School in Switzerland as well as a Master’s degree in Management from the HEC Lausanne School of Business in Switzerland.
Rounding out Ngo's team are Sun Junwei, formerly a senior economist at Morgan Stanley in Beijing, and Paul Yang, who was previously a Beijing-based vice president at BHR Partners, Bank of China’s cross-border investment platform. All three will focus on research.
So why choose Hong Kong over, say, Singapore as an Asia base? The source said it reflected Adia’s confidence in Hong Kong’s rule of law, financial expertise and the availability of a highly skilled and specialised workforce – as well as the fact that the city is a key gateway to China.
The fact that Adia decided it needs to be in Hong Kong but not London underscores the importance to the fund of access and proximity to China. An on-the-ground UK presence is simply not as necessary for investing in UK or European assets as a Hong Kong branch is for doing deals in the mainland.
Indeed, one head of sovereign wealth funds at an asset management firm said he was surprised Adia had not set up in Asia earlier. Regional peers have made similar moves; for example, Kuwait Investment Authority opened a representative office in Beijing in 2011.
Certainly Adia already has large commitments in the region. Some 10%-20% of its global portfolio invested in developed Asian economies, and one would assume that allocation is likely to rise, especially given the steady opening of China’s capital markets.
Ultimately, Adia’s motivation for opening in Hong Kong is similar to that in the mid-1980s for setting up shop in London, noted the source: Asia is a region with a lot of growth potential, where an on-the-ground presence is important to build relationships, understand local nuances and issues and identify emerging opportunities.
The move is also a logical extension of Adia’s push in recent years to build internal analytical expertise in areas where it sees the most growth potential, added the source.
That has been achieved in the past through frequent travelling to target markets, and will clearly continue, he noted. But the Hong Kong office will take things a step further in Asia, where the state fund sees the most immediate benefit from a local presence.
Adia is not thought to have any immediate plans for other offices.
The institution had closed the London office because it wasn’t using it any more, as all of its UK investments were being driven out of Abu Dhabi, said the source. The fund had taken the view that its business and relationships were sufficiently mature in the UK that there was no need to keep a presence there, he added.