China’s $200bn fund to take more buyout stakes(3)

The unnamed Chinese fund established to invest $200 billion (€148 billion) of the country’s money is reportedly considering further investments in private equity.

The vehicle made its first investment in May, taking a $3 billion stake in US buyout firm The Blackstone Group when it floated a portion of its management company in New York.

A state official said the vehicle would make more investments like this once it was fully functional, according to news agency Reuters.

Blackstone’s performance on the public markets has yet to match the buyout firm’s results. The group said last week it had tripled profits in the second quarter compared to the same period last year, yet its share price has dived by nearly 25 percent since its initial public offering in July. The shares were trading at $24.08 when the market closed on Friday, down from the launch price of $31.

The Chinese vehicle received a 4.5 percent discount on its stake, which it has agreed to hold in full for four years. 

But despite the short-term loss of nearly $600 million, Jesse Wang, vice chairman of Central Huijin, the Chinese central bank’s investment arm, told journalists: “If you are going to invest in a private equity firm, there probably is no better company.”

“If you want to increase yields and still maintain low risk, then you should put aside part of the money to make alternative investments, such as private equity firms, hedge funds and real estate investment trusts,” he added.  

This alternatives fund is expected to be launched in September, according to media reports. However, Wang declined to comment on the timing.

Central Huijin has already invested $60 billion in three state-owned commercial banks, and analysts have said the vehicle could provide two other banks, Agricultural Bank of China and China Development Bank, with similar investments, according to Reuters. However, this would still leave around $80 billion to be deployed across asset classes.