CIC takes on the world | FT Alphaville

CIC takes on the world

After a low-key year, China Investment Corporation really has come back out swinging. After last week’s news of its nifty deal with Apax Partners in Europe, a (US) SEC filing by the Chinese sovereign wealth fund gives an intriguing glimpse into how it is using exchange-traded funds to take positions on sectors ranging from healthcare to consumer services and gold.

The filing, as the FT reports on Tuesday, showed that CIC’s largest US stock market investments were in miner Teck Resources, investment bank Morgan Stanley, asset manager BlackRock and Visa, the credit card company. And about a quarter of CIC’s entire US portfolio was in ETFs, many of them provided by BlackRock’s iShares division.

Apart from healthcare and consumer shares, another chunk of CIC’s ETF investments are a bet on rising gold prices, while a third group is pegged to international stock markets including those of China and Japan, according to the report.

In addition, CIC has small holdings in financial stocks including Wells Fargo, Citigroup, Bank of America and AIG.

To remind: CIC, was given $200bn at its creation just 30 months ago, and is now waiting on another $200bn cash injection from Beijing.

CIC earned more than $60bn in 2009, the FT reports. So, in spite of some earlier setbacks – including some painful losses on investments in Morgan Stanley and buy-out firm Blackstone – that would make CIC “one of the more successful sovereign wealth funds in navigating treacherous markets after the financial meltdown”.

For example, CIC’s $713m stake in US asset manager BlackRock has risen sharply since it committed to a share placement to help fund BlackRock’s purchase of Barclays Global Investors in mid-2009.

In the field of commodities, meanwhile, CIC has invested shrewdly, with its stake in Teck Resources doubling in value. It has also made money on its $1bn investment in Singapore-listed Noble Group, according to the FT.

So what’s behind CIC’s growing investment savvy and international manoeuvres? According to an FT analysis in December, much of it has to do with CIC’s managing director Zhou Yuan, a former UBS banker in China from 1994 to 1998.

Zhou, who now heads CIC’s Strategic Investment and Concentrated Holding division, is in charge of the fund’s large positions in public companies such as Blackstone, Morgan Stanley and Noble Energy, and is popular with foreign visitors to CIC’s Beijing headquarters, according to the report.

Overall, CIC has boosted its staff to about 400 people, including 180 working in Huijin, the fund’s domestic arm which holds controlling or sizeable stakes in most of the country’s largest banks and other financial institutions, reports the FT, adding:

Below Lou Jiwei, CIC chairman, is a team of experienced Chinese professionals who include Gao Xiqing, chief investment officer, and Jesse Wang, chief risk officer. Most have worked both on Wall Street and within the Chinese bureaucracy.

Undoubtedly Zhou and his team had a big hand in CIC’s latest deal, with Apax Partners and implementing the ETF strategy in the US. But after the fund’s chairman Lou told a forum in Hong Kong last month that CIC’s top priority would be investing in emerging markets, particularly Asian ones, it would be a fairly good bet that CIC at some point soon will take its shopping trolley to Asia.

Related links:
How to say “more please” in Chinese – FTAlphaville
In depth: Sovereign wealth funds –
CIC: the multi-purpose SWF – FTAlphaville
China sovereign fund focuses on emerging markets – WSJ