CIC 'long-term investments' outstrip on performance

Over 32% of the Chinese SWF's portfolio is allocated to 'long-term investments', particularly infrastructure.

The China Investment Corporation’s (CIC) net global returns for the 2012 calendar year spiked to 10.6 percent, up from -4.3 percent in 2011 – and a large part of that turnaround was thanks to the sovereign wealth fund’s “long-term investments”, particularly infrastructure, according to CIC’s recently released annual report.

The $575 billion Chinese sovereign wealth fund (SWF) has dedicated 32.4 percent of its portfolio to “long-term investments”, which comprise infrastructure, mining, real estate and some private equity investments – though weighted towards infrastructure, according to the report. The “long-term” assets make up the largest chunk of CIC’s commitments.

“CIC attaches great importance to long-term investment and has drawn on its long investment horizon to achieve steady long-run returns,” the report stated. “CIC remains committed to fostering long-term and win-win relations with its business partners and investee companies.”

In terms of capital, CIC’s commitments to infrastructure, real estate and private equity had the biggest increase, with the government fund adding approximately $51 billion to the asset class over the course of last year – or bringing long-term equity investments to $356 billion from $305 billion in 2011, according to the report.

Five of CIC’s most prominent investments in 2012, in fact, were infrastructure-related – including Heathrow Airport, Thames Water, EP Energy, Polyus Gold in Russia, and Eutelsat Communications.

Additionally, CIC’s investment income from its long-term assets also grew to $63.4 billion, up from $53.4 billion in 2011. Unrealised gains across all asset classes – including long-term, public equities and government bonds – had the largest spike, totaling $12.2 billion up from a loss of $11.4 billion in 2011.

CIC has also increased its dependence on external managers for its investments. Around 64 percent of the SWF’s assets were externally managed by the end of 2012, versus 57 percent by the end of 2011. The report did not specify which assets were externally managed, however.

Just this month, CIC confirmed the appointment of a new chairman in Xuedong Ding, formerly a Vice Secretary General of China’s cabinet and Vice Finance Minister. He replaced Jiwei Lou, who left CIC in March to become Finance Minister.

With the appointment of the new chairman, Infrastructure Investor understands that CIC is currently reviewing its allocations to the different alternative asset classes to present an allocation proposal to Ding, though no details have been released yet.