Alternatives and public equities drive CIC’s record returns

The $941bn Chinese SWF will increase its allocation to infrastructure, in which it has invested $10bn over the past three years.

 

China Investment Corporation achieved a record net return of 17.6 percent in US dollar terms in 2017, the highest since it was established 10 years ago to manage foreign reserves of the world’s second largest economy.

The driver behind the double-digit return was the strong performance of alternative assets and global public equities, a source familiar with the matter told Infrastructure Investor.

The Chinese sovereign wealth fund, through its direct investment arm CIC Capital Corporation, completed around 30 deals and invested $10 billion in infrastructure in the past three years, the source noted. It is understood the performance of CIC’s infrastructure investments delivered returns of more than 13 percent.

According to the source, while CIC is currently more active in Europe and Southeast Asia, it remains interested in US infrastructure, particularly in the energy and power sector, given uncertainty in current policies for basic infrastructure. In May 2017, CIC set up a New York office to monitor and explore the North American market.

CIC “will steadily expand alternative and direct investments as signature components” of its portfolio, the sovereign wealth fund said in its 2017 annual report released earlier this week.

Two of CIC’s major infrastructure transactions last year included Equis Energy, a renewables platform the fund acquired alongside Global Infrastructure Partners for $5 billion, making it the world’s largest renewables transaction to date. The second was an investment of more than £600 million ($795.1 million; €678.4 million) in the UK’s National Grid, a transaction through which CIC, as a member of a Macquarie Infrastructure and Real Assets-led consortium, acquired a 61 percent stake in the gas distribution network.

Aside from energy infrastructure, CIC also “made forays into car parks, telecommunications, and power transmission and distribution”, according to the report.

Overall, in 2017, CIC Capital committed to 20 deals across industries and sectors worth $3.8 billion.

As at the end of 2017, CIC’s total assets stood at $941.4 billion. Its exposure to alternative assets, including hedge funds, multi-asset strategies, private equity, commodities, real estate and infrastructure, accounted for 39.3 percent, excluding CIC Capital loans. Public equities represented the largest share in its portfolio at 43.6 percent, while fixed income accounted for 15.9 percent.

Since inception, CIC’s overseas investments had generated a net cumulative annualised return of 5.94 percent as at the end of December 2017, the sovereign wealth fund said.