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CIC in robust financial health as others flounder

By Wang Bo (China Daily)
Updated: 2009-04-02 08:07

China's $200-billion sovereign wealth fund is still in robust financial health despite the "small losses" in its overseas investments during 2008, Lou Jiwei, chairman of China Investment Corporation (CIC), said in an article published in the Caijing Magazine on Tuesday.

Related readings:  CIC cautious about financial derivatives investment  CIC fund seen making 5% profit  CIC sees 'good opportunity' for int'l investment  CIC to increase investment in all classifications

CIC has largely fulfilled the objectives set by the board of directors at the beginning of 2008 and its financial performance is far better than many other sovereign funds, Lou said.

Many sovereign wealth funds have seen their overseas investments languish due to the global financial crisis. Norway's government pension fund posted a loss of nearly $90 billion last year, which is equivalent to the total investment return it made in the past 12 years since the sovereign fund was established.

Lou claimed that CIC had shunned "significant risks and losses" in its investment allocation last year, as it adjusted its investment strategies by reducing stock holdings and retaining more cash or cash equivalent assets.

"Admittedly, the global financial crisis has had an adverse impact on CIC's business, especially the investment on overseas financial products," Lou said.

"As the company was established not so long ago, its investment volume is quite limited," the chairman said.

CIC was founded in September 2007 to help manage part of the country's colossal foreign exchange reserves. With its $200 billion fund, the company is reported to have made a profit of about $10 billion, or an annual return of 5 percent last year, thanks to the fact that 90 percent of its investment portfolio is in assets with high liquidity.

However, there has also been speculation that the company had sustained huge losses on a number of high-profile overseas transactions, including buying into the troubled financial giants Morgan Stanley and Blackstone.

Its investment in Blackstone, for example, has led to losses of $2.2 billion given the current price of the Blackstone stock. CIC came in for a lot of flak in this regard and Lou reportedly said last year the company would be very cautious in future overseas investments.