NSSF considers investments in foreign PE funds

Already an active LP in domestic private equity vehicles, the state pension fund's foreign exposure is currently restricted to the public markets. These investments account for 7% of its RMB857 billion ($136 billion) in assets under management. State Council approval would be required to participate in foreign PE and it is unclear whether this would be granted, The Wall Street Journal reported, citing people familiar with the situation.

Last June, Zhongmin Wang (pictured), vice chairman of the NSSF, said that fund would inject approximately RMB17 billion into around 100 domestic private equity firms, adding that RMB10 billion had already been committed. By expanding its reach overseas, the fund would be mirroring the approach of China Investment Corp (CIC), the country's only established international LP.

In 2010, CIC recorded a return of 11.7% on its offshore investments. In the same year, its exposure to alternative investments including private equity also surged to 21% from 6% in 2009. The sovereign wealth fund has been most committed to North America, which accounted for 41.9% of its investments in 2010, while Asia Pacific followed on 29.8%, then Europe on 21.7%, with Latin America and Africa in single digits.

CIC currently has $110 billion allocated to overseas investments and an additional capital injection of $100-200 billion has been mooted for over a year. In October 2010, the fund opened its first office in Hong Kong and a Canada office followed three months later.

The NSSF is the only Chinese institution that acts as a passive LP in the Western sense. A move into private equity funds would provide another important source of capital for global GPs.

The pension fund has achieved annualized returns of 9.17% since it was set up in 2000.

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• Topics
• Greater China
• LPs
• China
• LPs
• NSSF
• CIC