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China Investment Corp., (CIC) outperformed many other sovereign wealth funds following the global crisis despite a tumultuous 2008, according to Asset International. With the 80% surge in income, CIC’s assets now stand at $332.4bn, reversing a 2.1% decline in 2008 and making it the fifth largest SWF in the world.

The report said that CIC’s positive performance last year was brought by increased allocation to overseas investments and higher-risks assets. The fund saw its $58bn in overseas portfolio jumping by 11.7% or $6.8bn on commodity bets, according to an AFP report.

At least 36% of the fund’s overseas portfolio was invested in equities last year, 26% in fixed-income products, 32% was held in cash and 6% was in alternative investments, highlighting the SWF's move toward higher-risk assets last year. North America was the top destination for its diversified equity investments in 2009, accounting for 43.9%. Asia and the Pacific regions attracted 28.4%, Europe 20.5%, Latin America 6.3%, and Africa 0.9%, Asset International added.

A Bloomberg report said CIC’s Executive Vice President Jesse Wang has asked the Chinese government for more funds to invest overseas. CIC’s cash holdings fell by 55 percentage points to 32% of its portfolio as of end Dec. 31, 2009.

In May, CIC pledged to invest $790m in a new oil-sands venture with Canada’s Penn West Energy Trust, giving the fund a significant stake in the world’s largest crude deposits outside Saudi Arabia. The firm bought an estimated $845m stake in Apax Partners LLP’s private-equity fund in February.

Victoria Barbary, senior analyst at Monitor Group in London, told Bloomberg: “Our preliminary data for the first half of 2010 suggests that CIC is continuing to pursue its strategy of investing in natural resources and sharing risk through partnerships and managed funds, as well as some exposure to private equity. Again their strategy seems to be reasonable returns, with a risk profile that limits the downside, and protects against dollar-based inflation/devaluation.”

CIC facing challenges in 2010
CIC’s Wang admitted last month that the fund was facing a more challenging year in 2010. He revealed that the fund had mark-to-market losses of about 10% in May and June because of weakness in U.S. and European markets, reported the Wall Street Journal.

CIC’s Chairman and Chief Executive Lou Jiwei said: "Looking forward, it is clear that 2010 will continue to present a challenging investment environment. The condition of the global economy is by no means certain, and markets remain volatile." However, he said CIC is a long-term investor with a positive long-term vision.

Another challenge that CIC faces is the uncertainty over its stewardship of Central Huijin Investment Ltd., its domestic investment arm, which owns major stakes in several of China's biggest banks. Huijin sometimes poses a conflict with CIC's other primary mission, which is investing overseas. The issue whether Huijin should remain under CIC or be spun off will be discussed by top officials at a government financial work conference later this year, it was said.

CIC on a hiring spree to boost overseas investments
On Tuesday, CIC has announced it would start a fresh round of global hiring “due to business development needs.” The fund said it wants to attract people from different countries to fill up vacancies, including asset allocation researchers, financial analysts, credit and country risk analysts, hedge fund analysts, and private equity investment managers.

A total of 64 positions were posted as vacancies in its website, Bloomberg reported.

CIC trims down stake in Morgan Stanley
Meanwhile, CIC was reported to have sold $264m worth of Morgan Stanley shares, equivalent to 9.8 million shares, in the past seven days, which analysts say could be a move to avoid greater disclosures required under U.S. regulations.

In its regulatory filings before the U.S. Securities and Exchange Commission (SEC), CIC sold the shares in separate trades last week. This brought CIC’s stake in Morgan Stanley to about 166.5 million shares, or about 11.9 % stake.
- Komfie Manalo

Today’s Opalesque Sovereign Wealth Funds Briefing can be found here: Source