By Li Qing
BEIJING ( Caixin Online ) — En route to another double-digit annual return, China’s sovereign-wealth fund China Investment Corp. (CIC) last year expanded long-term asset and direct investments while reducing the cash percentage of its global portfolio.
Also noted in CIC’s recently released financial report for 2010 — its third year in business — was a board of directors decision to set targets for cumulative, annual return rates. The board also decided to extend an investment assessment cycle to 10 years from five.
“This change better fits CIC’s positioning as a long-term institutional investor and increases its tolerance for short-term market fluctuations,” explained Chairman and Chief Executive Officer Lou Jiwei at the fund’s annual meeting.
In terms of the fund’s regional focus, the report said CIC decreased investment proportions in North America and Latin America last year but put more emphasis on the Asia-Pacific region, Europe and Africa.
Beyond the annual report and Lou’s remarks, however, lingering questions remain about the future of what began as a $200 billion fund.
Will the fund receive a long-discussed capital injection from the central government to boost its clout? What’s in store for CIC’s relationship with the government’s domestic investment arm Central Huijin? And given the challenges of the current global financial environment, how will the fund balance investment objectives and risk prevention?
Closer look
The report’s financial charts show the CIC global investment portfolio yielded a 11.7% return rate in 2010, about the same as the previous year but substantially better than the financial crisis year of 2008. Thus, since the fund’s founding, the annual return has averaged 6.4%.
CIC added nearly $36 billion in various investments last year. Investment gains from its global portfolio jumped 23% to $55.39 billion from 2009, and net profit rose to $51.56, an increase of 23.76%.
CIC pumped more money into private equity, infrastructure projects, direct investment and real estate, especially real-estate investment trusts. Alternative investments, jumped increased to 21% of the global portfolio from 6%in 2009.
Finance was a favorite target for the fund, rising to 17% of the portfolio. Energy attracted 13% of the war chest and raw materials 12%.
Meanwhile, the portfolio’s cash proportion fell to 4% at year-end from 32% just one year earlier.
The latest report points to significant changes in the fund’s organizational structure, senior management and investment departments. It suggests, for example, that the CEO now directly oversees all investment departments, management offices and foreign branches.
Back in 2009, the fund had chief and deputy chief investment officers, chief and deputy chief operating officers, and a chief risk officer. These positions vanished last year. Former COO Zhang Hongli retired last year, and no replacement is mentioned in the latest report.
Huijin relations
For all its data and details, though, the annual report sheds little light on the future of CIC’s complicated relationship with Central Huijin.
The institutions remain joined at the hip: Central Huijin functions under CIC’s wing as a domestic, government-policy investor. And although the annual report does not mention Central Huijin’s investment statistics, Caixin estimates that its earnings last year likely improved CIC’s overall return rate.
So while the official CIC global investment return last year was 11.7%, adding Central Huijin’s domestic investment return would probably raise that figure to 13.7%, according to Caixin’s estimate.
The relationship dates to 2007, when the Ministry of Finance put Central Huijin under the newly formed CIC and injected the latter with $200 billion raised by issuing special bonds.
Central Huijin spent the next two years pumping $90 billion of that amount into state-owned financial institutions, leaving CIC with $110 billion for investing overseas.
Lou said at the fund’s outset that CIC “needs to make 300 million yuan [$46.6 million] on an average workday” to match the $200 billion investment core. His calculation was based on the interest owed on the finance ministry’s 1.55 trillion yuan in 10- and 15-year bonds issued in 2007 at rates ranging from 4.3% to 4.69%.
Over the years, CIC has tried to distance itself from Central Huijin, which is closely linked to the government. The sovereign-wealth fund emphasizes its independence from the government, especially when pursuing of commercial investments abroad. The fund has been scrutinized for political motives by governments in recipient countries.
Indeed, CIC generally would like to separate from Central Huijin. But so far it’s been unwilling to cut the financial cord or the latter’s access to wealthy and influential state-owned enterprises.
For its part, Central Huijin still wants to work under CIC for the benefits that come with an international institution with market and policy functions.
The 2010 report reflects a change in the way CIC reports investment returns, since the 11.7% investment yield figure represents only overseas investment performance, not Central Huijin’s domestic returns.
CIC’s annual reports for 2008 and 2009 cited a “global investment portfolio return” as well as a “return on capital.” The latter included Central Huijin’s performance.
CIC’s global returns slumped to a 2.1% loss in 2008 but climbed to 11.7% in 2009, while its returns on capital were 6.8% and 12.9%, respectively, in those years.
The 2010 report also revealed that the CIC board, at a meeting in January, voted to lengthen the investment assessment period to 10 years. CIC spokesperson Wang Shuilin said the fund is making corresponding adjustments to asset allocations, risk management and performance evaluations.
Source: http://www.marketwatch.com
BEIJING ( Caixin Online ) — En route to another double-digit annual return, China’s sovereign-wealth fund China Investment Corp. (CIC) last year expanded long-term asset and direct investments while reducing the cash percentage of its global portfolio.
Also noted in CIC’s recently released financial report for 2010 — its third year in business — was a board of directors decision to set targets for cumulative, annual return rates. The board also decided to extend an investment assessment cycle to 10 years from five.
“This change better fits CIC’s positioning as a long-term institutional investor and increases its tolerance for short-term market fluctuations,” explained Chairman and Chief Executive Officer Lou Jiwei at the fund’s annual meeting.
In terms of the fund’s regional focus, the report said CIC decreased investment proportions in North America and Latin America last year but put more emphasis on the Asia-Pacific region, Europe and Africa.
Beyond the annual report and Lou’s remarks, however, lingering questions remain about the future of what began as a $200 billion fund.
Will the fund receive a long-discussed capital injection from the central government to boost its clout? What’s in store for CIC’s relationship with the government’s domestic investment arm Central Huijin? And given the challenges of the current global financial environment, how will the fund balance investment objectives and risk prevention?
Closer look
The report’s financial charts show the CIC global investment portfolio yielded a 11.7% return rate in 2010, about the same as the previous year but substantially better than the financial crisis year of 2008. Thus, since the fund’s founding, the annual return has averaged 6.4%.
CIC added nearly $36 billion in various investments last year. Investment gains from its global portfolio jumped 23% to $55.39 billion from 2009, and net profit rose to $51.56, an increase of 23.76%.
CIC pumped more money into private equity, infrastructure projects, direct investment and real estate, especially real-estate investment trusts. Alternative investments, jumped increased to 21% of the global portfolio from 6%in 2009.
Finance was a favorite target for the fund, rising to 17% of the portfolio. Energy attracted 13% of the war chest and raw materials 12%.
Meanwhile, the portfolio’s cash proportion fell to 4% at year-end from 32% just one year earlier.
The latest report points to significant changes in the fund’s organizational structure, senior management and investment departments. It suggests, for example, that the CEO now directly oversees all investment departments, management offices and foreign branches.
Back in 2009, the fund had chief and deputy chief investment officers, chief and deputy chief operating officers, and a chief risk officer. These positions vanished last year. Former COO Zhang Hongli retired last year, and no replacement is mentioned in the latest report.
Huijin relations
For all its data and details, though, the annual report sheds little light on the future of CIC’s complicated relationship with Central Huijin.
The institutions remain joined at the hip: Central Huijin functions under CIC’s wing as a domestic, government-policy investor. And although the annual report does not mention Central Huijin’s investment statistics, Caixin estimates that its earnings last year likely improved CIC’s overall return rate.
So while the official CIC global investment return last year was 11.7%, adding Central Huijin’s domestic investment return would probably raise that figure to 13.7%, according to Caixin’s estimate.
The relationship dates to 2007, when the Ministry of Finance put Central Huijin under the newly formed CIC and injected the latter with $200 billion raised by issuing special bonds.
Central Huijin spent the next two years pumping $90 billion of that amount into state-owned financial institutions, leaving CIC with $110 billion for investing overseas.
Lou said at the fund’s outset that CIC “needs to make 300 million yuan [$46.6 million] on an average workday” to match the $200 billion investment core. His calculation was based on the interest owed on the finance ministry’s 1.55 trillion yuan in 10- and 15-year bonds issued in 2007 at rates ranging from 4.3% to 4.69%.
Over the years, CIC has tried to distance itself from Central Huijin, which is closely linked to the government. The sovereign-wealth fund emphasizes its independence from the government, especially when pursuing of commercial investments abroad. The fund has been scrutinized for political motives by governments in recipient countries.
Indeed, CIC generally would like to separate from Central Huijin. But so far it’s been unwilling to cut the financial cord or the latter’s access to wealthy and influential state-owned enterprises.
For its part, Central Huijin still wants to work under CIC for the benefits that come with an international institution with market and policy functions.
The 2010 report reflects a change in the way CIC reports investment returns, since the 11.7% investment yield figure represents only overseas investment performance, not Central Huijin’s domestic returns.
CIC’s annual reports for 2008 and 2009 cited a “global investment portfolio return” as well as a “return on capital.” The latter included Central Huijin’s performance.
CIC’s global returns slumped to a 2.1% loss in 2008 but climbed to 11.7% in 2009, while its returns on capital were 6.8% and 12.9%, respectively, in those years.
The 2010 report also revealed that the CIC board, at a meeting in January, voted to lengthen the investment assessment period to 10 years. CIC spokesperson Wang Shuilin said the fund is making corresponding adjustments to asset allocations, risk management and performance evaluations.
Source: http://www.marketwatch.com
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