CIC getting decent returns, chief says
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China Investment Corporation (CIC), the nation's sovereign wealth fund, has invested half of its $110-billion available capital in the overseas market and has gained decent returns from it so far, its head said yesterday.
"We have reaped not bad returns from our investment so far this year," said Lou Jiwei, the CIC chairman, adding he would not be able to guarantee that those returns would still be 'good' by year-end, as this depended on various factors.
The nation's $200-billion fund, which has been on a bumpy road since it was established over two years ago, stepped up its overseas investments from the second quarter of the year when the global financial market started stabilizing and investor sentiment bounced back, Lou said.
"We mainly invested in publicly traded assets through experienced external fund managers this year, and also made some direct investments in the mining, energy and real estate sectors," Lou told the 2009 Tsinghua Management Global Forum in Beijing.
CIC has made a string of investments in commodity-related companies globally so far this year, including the recent $500-million investment in SouthGobi, a Canada-based company that mines coal in Mongolia. This has raised market suspicion that the fund might have shifted its focus to direct investments, according to Lou.
"Actually, there has been no significant change in our overall investment strategy, as the bulk of our investments is still on publicly traded financial products," Lou said, adding that such an investment allocation was time-efficient and could maximize returns.
Li Xiaogang, director of the Foreign Investment Research Center at Shanghai Academy of Social Sciences, said this was the best time for the sovereign fund to ramp up its overseas investments, as the global economy was picking up and the financial crisis had brought global asset prices back to a fairly reasonable level.
"But more importantly, CIC's investment story would hopefully help mobilize overseas investment from the nation's private sector, which is still weak at present," Li said, noting that some countries were still reluctant to accept investments from sovereign wealth funds.
In response to such concerns, Lou clarified that the fund's main purpose was to seek optimal investment returns for the nation, rather than being driven by a national strategic agenda of controlling global resource assets.
"Our investment is to make money. I don't care how many tons of oil we can ship home, what I do care about is the stock price," Lou stressed.
However, Lou, who is also a member of the advisory board of the School of Economics and Management of Tsinghua University, warned that there was still a "small bubble" in global asset prices and many currencies were facing depreciation pressure.
"Our investment in commodity-related assets and the real estate industry is a measure to hedge against inflation in the medium term," he said.
As some fundamental problems of the global financial market remained unresolved, the CIC chairman said he could not rule out the possibility of a "second dip" in the global economy. "In that case, we will seek to exit from these offshore investments as soon as possible."
Like many other sovereign wealth funds across the world, CIC, which manages part of the nation's colossal foreign exchange reserves, has seen part of its investments sour during the global financial tsunami.
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