CIC posts overseas losses, domestic gains in 2011
27 Jul 2012
China Investment Corp. made a loss of 4.3% with its overseas investment in 2011, but the company as a whole still achieved profit of $43.422bn, indicating sound returns on its domestic assets.
The Chinese sovereign wealth fund comprises China Investment International, which focuses on overseas holdings, and Central Huijin Investment, which oversees the domestic portfolio. Total returns from both entities fell to 1.5% from 4.6%.
"Like many major sovereign wealth funds and global institutional investors, overseas investment was affected by an overall downturn in the global market," CIC spokesman Wang Shuilin told reporters in Beijing. "Moreover, some of the projects CIC invested in are still at the early stages" and these will mature.
According to its annual report, 2011 is the first year CIC utilised its full allocation, with AUM rising 11.7% to $482.2bn in 2011, from $409.2bn in 2010. It posted positive returns on its global bonds and credit segments, but saw losses on its equities portfolio, PE and direct investment portfolios, dragging down overall profits.
CIC Chairman and CEO Lou Jiwei said in the report: "In 2011, we calibrated our asset allocation to better reflect the longer investment horizon and to enhance the flexibility of our investment portfolios. We gradually built up positions in nonpublic market assets, particularly direct investments and private equity investments in such industries as energy, resources, real estate and infrastructure."
The annual report showed that, within overseas equity investment, financials account for 19% and energy stocks for 14%. In terms of geographic exposure, North America accounted for the largest proportion, rising 1.9% to43.8%, followed by Asia-Pacific at 29.6%, and Europe 20.6%.
In 2011, the annual rate of return on overseas investment was -4.3% and the corresponding cumulative annual rate of return was 3.8%, the lowest since CIC was established in 2007. At the end of 2011, China Investment International received a second capital injection of $30bn from State Administration of Foreign Exchange.
Notably, Central Huijin has sizeable equity holdings in the big four Chinese state-owned banks, all of which achieved sound profits in 2011. Having bought on a dip in October last year, this may be a major source for CIC's profit last year.
Lou added: "Looking ahead, the global economy will continue to recover, but the process will be fragile. With fresh volatilities in the financial markets still posing serious risks, CIC will adhere to prudent investment approaches as embodied in our investment philosophy, adjust our asset allocation structure and align our investments with the prevailing global economic dynamics."
Overseas Investment Portfolio Annual Performance
Year Cumulative annualised return (%) Annual return (%)
2008* -2.1 -2.1
2009 4.1 11.7
2010 6.4 11.7
2011 3.8 -4.3
*Cumulative annualised returns and the annual return for 2008 are calculated since inception on 29 September 2007.
Author: Yong An