China's CIC posts negative return on overseas investments for 2015

Xuedong Ding, CIC's chairman and CEO, noted that 2015 had been a challenging year for the global economy and for CIC. He highlighted the contribution of slower-than-expected growth in the US, a technical recession in Japan, anemic investment performance in Europe, depressed emerging economies, and a slowdown in China to volatility in stocks, commodities and non-US dollar currencies.

The loss on overseas investments compares to gains of 5.47% and 9.33% in 2014 and 2013, while the net cumulative return since inception stands at 4.58%. Long-term investments - which include private equity, real estate and infrastructure - account for 22.16% of the portfolio, down from 26.2% in 2014. The absolute returns portion increased slightly to 12.67%, fixed income held steady on 14.44%, and public equities exposure grew from 44.1% to 47.47%. Two thirds of assets in the international portfolio are managed externally.

CIC's total assets amounted to $813.7 billion at the end of 2015, up from $746.7 billion a year earlier. Of these, $513.4 billion - or 63% - are classified as long-term equity investments; through Central Huijin, the sovereign wealth fund has sizeable stakes in a number of domestic financial institutions. Investment income came to $76.7 billion, down from $94.9 billion in 2014.

Ding underlined the steps taken to prepare CIC for "lower asset yield expectations worldwide and the growing downside risks" of the current investment environment. For long-term asset management, these included ramping up investments in assets that generate stable returns such as real estate and infrastructure.

Another move saw the establishment of CIC Capital, a direct investment arm. While CIC International is responsible for overseas public market equity, bond, hedge fund and real estate investments, as well as private equity fund commitments and co-investments, CIC Capital covers direct deals and manages bilateral and multilateral fund investments.

During 2015, CIC also set up a dedicated real estate department to focus on large-scale direct investment projects in developed economies. Nine deals have been completed so far. In infrastructure, the sovereign wealth fund has been actively participating in bidding for mature assets in developed countries and selectively considering greenfield projects and emerging market infrastructure assets.

On the private equity front, CIC continued to focus on strategic partnership accounts with a handful of managers, and strengthen engagement with other institutional investors in order to address more co-investment and club deal opportunities. In addition, private equity credit was identified as an independent strategy.

As of June, CIC had 592 staff, including global investment personnel of 466. The annual report confirms one senior appointment: Guangshao Tu, who was previously vice mayor of Shanghai and before that held several positions with the China Securities Regulatory Commission, is now vice chairman and president of CIC. He replaced Keping Li, who took over from Xiqing Gao in 2014.

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• Topics
• Greater China
• LPs
• Performance
• CIC
• Sovereign wealth fund
• China