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China Investment Corporation gains further $50bn, announces BlackRock JV

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  • China Investment Corporation gains further $50bn, announces BlackRock JV

CHINA - The development of Chinese sovereign wealth funds continued this week with news that China Investment Corporation (CIC) has received a further $50bn (€38bn) capital injection and entered into a landmark partnership deal with Blackrock.

Meanwhile, CDB capital - China development bank’s fund management arm - has raised a fresh $9bn for its private equity fund of funds.

CIC has not officially confirmed the $50bn capital injection, which state media reported was reached in late 2011 and transferred to CIC over the Lunar New Year.

Rumours of the move have been circulating for some time, but they made headlines this week after CIC officials informally confirmed the move.

This brings CIC’s total assets to $460bn.

CIC has undergone significant restructuring in terms of institutional structure and personnel in recent months.

The fund is under pressure to improve returns after outperforming the MSCI global benchmark by just 2 percentage points last year.

In response, senior CIC officials have been seeking more capital to pursue a more expansive investment strategy.

Following a period of relative inactivity and having endured most of late 2011 cash short, confirmation of the cash injection indicates that the central government has approved CIC’s proposed strategy, and further funds are likely to be released on a performance-related basis.

CIC is thought to be looking for a total $100bn-200bn, with senior officials recently citing a strong desire to increase exposure to European fixed asset and infrastructure deals.

Also this week, there were reports of a deal to launch a jointly managed fund with Blackrock that will invest both inside and outside China.

Although the fund’s strategy has not been finalised, the long-term deal reflects CIC’s emphasis on improving the sophistication of its asset management techniques and adding a more international flavour.

According to the SWF Institute, this partnership model is growing in regions such as the Middle East and Asia.

In a note, it said: “Global asset management firms want to gain business, especially in regions of high economic growth. On the other hand, sovereign investors want to increase knowledge and engage in knowledge transfer opportunities.”

In other news, the CDB-backed Guochuang fund-of-fund private equity component, the Kaiyuan fund, has raised CNY9bn ($1.4bn) in its second round of fund raising.

The fund, which had a total original capitalisation of CNY60bn, has been largely inactive since its inception in December 2010 as its management structures were built out.

With back-end functions reaching operational status, however, it is set to become the latest player in China’s expanding sovereign wealth fund armoury.

This story first appeared in IPE sister publication Investment & Pensions Asia.

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