CIC's alternatives exposure increases

The Chinese sovereign wealth fund, which has deployed all of its investable capital received to date, recorded an overall return of 11.7%.

China Investment Corporation (CIC) increased its investments in alternative assets to 21 percent for the year 2010 from 6 percent the previous year, as it stepped up its investment activities in sectors including private equity.

The Beijing-based sovereign wealth fund responsible for diversifying China’s foreign exchange holdings with a view to obtaining higher risk-adjusted returns, revealed its sector exposures in its annual review, published yesterday. 

CIC said the total value of its assets had grown to $409.6 billion from $332.4 billion and that its assets had generated a return of 11.7 percent for the year to 31 December with a cumulative annualized return of 6.4 percent. The overall return mirrors the fund’s return in 2009.

CIC chairman and chief executive Lou Jiwei said: “2010 was a year of substantial growth and accomplishment for China Investment Corporation. As CIC fully deployed the investable capital in its global portfolio, it continued to develop its organisation and build its institutional capabilities.”

CIC, which said it had become ‘essentially fully invested’ after investing an additional $35.7 billion to its original capital of $200 billion, said it had reduced its cash holdings significantly in favour of investments in long term assets. 

“As a long-term investor, deployment of our capital in 2010 was weighted towards private equity, infrastructure and other direct investments, guided by our strategic asset allocation plan,” Lou said.

In addition to the increase in allocations to alternatives, CIC also upped investments in equities to 48 percent from 36 percent, and fixed income securities to 27 percent from 26 percent in 2009. The decrease came in cash holding from 32 percent to 4 percent. Overall, CIC invested approximately $35.7 billion of new investment in 2010.

The annual report also noted that the sovereign wealth fund achieved greater geographical balance during 2010 by increasing investment in Asia and Africa. Within its investment in equities, Asia Pacific accounted for 29.8 percent and Africa stood at 1.2 percent, with North America 41.9 percent, Europe 21.7 percent and Latin America 5.4 percent.

CIC made no mention, however, of a widely anticipated fresh equity injection from the state. According to the Financial Times, the fund is in line to receive up to a further $200 billion, although that is yet to be communicated officially.

In November last year, CIC opened in Hong Kong in a bid to leverage the former British colony’s status as a global financial centre. Earlier this year, the fund opened a representative office in Toronto, its first outside Asia.

Last month, CIC appointed Li Keping as chief investment officer, executive director and executive vice president. He joined from the country’s Social Security Fund, where he served as deputy chairman. In addition, the report noted that CIC’s global investment team grew to 351 professionals from 246 during 2010.