CIC wary of global political uncertainty

China’s sovereign fund is looking to make more direct deals in the US via a new outpost in New York.

China Investment Corporation, the country's $813 billion sovereign wealth fund, has warned that a global investment environment characterised by low growth and high volatility is further clouded by rising political uncertainty.

The institution posted net returns of 6.22 percent over the last year on its overseas investments, compared with -2.96 percent during the previous period, according to its annual report released on Tuesday.

Alternative investments make up the second largest share of its portfolio at 37.2 percent as of the end of 2016. The portfolio generated “satisfactory diversification effect and higher long-term expected returns”, reported CIC.

The sovereign wealth fund started its private equity portfolio in 2008 which mainly consists of fund investments and co-investments with 80 global managers. For co-investments, CIC has closed more than 30 deals in key areas as TMT, healthcare, consumption and commercial services.

Among fund managers CIC has invested in include AGIC Capital, Apax Partners and RRJ Capital, according to PEI data.

In February, CIC together with Temasek Holdings, Silk Road Fund and Hopu Investment Management also launched the Hou An Innovation Fund which is targeting $800 million to invest in technology companies globally.

Over the past decade, the market value of CIC's private equity portfolio exceeded $20 billion and cumulative returns reached more than $10 billion.

Given rising valuation and fierce competition in the current market, CIC said it will continue to optimise its portfolio structure and deepen collaboration with capable fund managers, as well as broaden sources of co-investment.

“Looking ahead, global growth for 2017 should pick up speed, but the downside risks cannot be overlooked,” noted Tu Guangshao, CIC's vice-chairman and president. “The multiple rounds of quantitative easing by key economies and the weak recovery in developed economies during the eight post-crisis years have led to keen competition for capital and to low returns.”

Headquartered in Beijing, CIC started off with an initial funding of $200 billion in 2007. Its assets exceeded $813.5 billion by end of 2016

Additional reporting by Carmela Mendoza