China Investment Corporation achieved a record net return of 17.6 percent in US dollar terms in 2017, the highest since it was established 10 years ago to manage foreign reserves of the world’s second largest economy.
The driver behind the double-digit return was the strong performance of alternative assets and global public equities, a source familiar with the matter told sister title Infrastructure Investor.
The sovereign wealth fund noted in its FY 2017 annual report released this week that it “developed new mechanisms for managing private equity fund accounts and established deep working relationships with a select few managers”. CIC has backed funds managed by Asian-European manager AGIC Capital, Hopu Investment Management, Goldman Sachs Principal Investment Area and Atlantic Bridge, according to PEI data.
CIC and Goldman Sachs set up the $5 billion China–US Industrial Cooperation Fund last year, which will invest in industrials, manufacturing, healthcare and technology companies in the US seeking entrance into the Chinese market. It is unclear how much has been raised so far. Private Equity International understands CIC and Goldman are committing $1.25 billion each, while the remaining amount will be raised by each side from Chinese and US investors.
In addition, CIC said in its report it “developed its professional platform for direct investments in the last year, optimised its decision system for overseas investments, and aligned investments and services with the Belt and Road Initiative”.
CIC invests in private equity through the investment department of CIC International, making direct investments or fund commitments in industries other than energy,
resources, agriculture, forestry, husbandry, fisheries and infrastructure.
According to the source, while CIC is currently more active in Europe and South-East Asia, it remains interested in US infrastructure, particularly in the energy and power sector, given uncertainty in current policies for basic infrastructure. In May 2017, CIC set up a New York office to monitor and explore the North American market.
CIC “will steadily expand alternative and direct investments as signature components” of its portfolio, the sovereign wealth fund said in the report.
Aside from energy infrastructure, CIC also “made forays into car parks, telecommunications, and power transmission and distribution”, according to the report.
Overall, in 2017, CIC Capital committed to 20 deals across industries and sectors worth $3.8 billion.
As at the end of 2017, CIC’s total assets stood at $941.4 billion. Its exposure to alternative assets, including hedge funds, multi-asset strategies, private equity, commodities, real estate and infrastructure, accounted for 39.3 percent, excluding CIC Capital loans. Public equities represented the largest share in its portfolio at 43.6 percent, while fixed income accounted for 15.9 percent.
Since inception, CIC’s overseas investments had generated a net cumulative annualised return of 5.94 percent as at the end of December 2017, the sovereign wealth fund said.
– Carmela Mendoza contributed to this report.