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Sudha Datta looks back on ADIA's lending business

31 January 2017

Sudha Datta speaks to Global Investor/ISF's Andrew Neil about his career at ADIA

Read more: securities lending ADIA

As Abu Dhabi Investment Authority (ADIA) celebrated its 40th anniversary last year, the world’s second largest sovereign wealth fund also bade farewell to one of its most loyal servants when Sudha Datta decided to hang up his boots.

An accountant by trade, Datta first joined ADIA in 1981 after a short spell working as a consultant for Price Waterhouse, now PwC. For the next decade he carried out investment portfolio accounting, valued assets and prepared statements as the UAE sovereign grew in size.

A spell in Toronto in the early nineties followed, during which Datta built up a successful  tax and advisory practice for small businesses before going on to balance the books for Purolator Courier then the largest distribution company in Canada.

ADIA lured Datta back in 1996 and there he remained for the next twenty years, eventually becoming head of operations. In practice, Datta’s role at the fund saw him forge close ties with custodians, lending agents, brokers, fund managers, tax and legal advisors globally.

Across securities services, he became the fund’s key decision maker and much of his time was spent conducting due diligence visits, selecting providers and negotiating legal and service level agreements. Ultimately though, he had to convince individuals further up the chain - ADIA’s Investment Committee – to follow his judgement. 

"It wasn’t always easy," he told Global Investor/ISF. "AIDA was and indeed remains a highly conservative long-term player. Securities lending, for example, was talked about from the moment I joined but took years to get off the ground."

In 1999, three years into Datta’s second stint at the sovereign, ADIA decided to create a dedicated operations department. Fortunately for Datta, an individual with an investment background became executive director of the department and moved into the unit to accompany him. The pair then raised the topic of securities lending again.

"Eventually we began to lend fixed income securities before moving to equities" he explained. "It was a long, gradual journey.  All of our lending was conducted through agents, never on a principle basis. That remains true today."

Ultimately the balance sheet strength of the agent banks was crucial to ADIA’s Investment Committee engaging in the idea of stock loan in the first place. Primarily, Datta’s selection process involved a financial assessment of the bidders before he even considered a closer inspection of how each agent ran their lending desk. Once a decision was made, he gave complete independence to lending agents as long as they stuck to guidelines.

For the next eight years the sovereign continued its securities lending program earning substantial income in the process. Datta and his team focused on bench marking performance and carefully monitoring risk. The fund celebrated its most profitable year from stock loan in 2007, before the financial crisis ensued and lending came to a halt.

"Securities lending operations ceased for a couple of years," Datta recalls. "However, we never lost a dime from securities lending during the crisis. It turned out to be a proud moment in my career. Looking back though, I can’t thank ADIA’s investment committee enough."

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