Private equity and real estate investments made by the Hong Kong Monetary Authority’s Exchange Fund posted 14 percent higher annual gains than the previous year, according to a statement.
HKMA, which manages the city-state’s reserves, attributed the HK$8.9 billion ($1.1 billion; €970 million) investment income – compared with the previous year’s HK$7.8 billion – to short-term volatility in financial markets. The figure is as of 31 March.
The report did not reveal the total value of the Exchange Fund’s private equity and real estate investments as of end-March this year. HKMA’s 2017 annual report, however, stated the fund’s private equity holdings amounted to HK$157.2 billion and real estate at HK$78.4 billion as of end-December 2017.
Among HKMA’s private equity investments include a commitment to CVC European Equity Partners VI, the London-headquartered firm’s 2013-vintage, €10.9 billion buyout fund, according to PEI data.
On the outlook for private equity, a spokesman for HKMA said the investor is seeing increasing competition among investors for quality alternative assets.
“In light of this, we will continue to work with experienced and trusted partners to identify good investment opportunities with great potential and conduct regular reviews of our allocation to alternative assets,” he added.
HKMA also expects the global investment environment “to become even more complex and challenging in the second half of the year,” Norman Chan, chief executive of the HKMA, said in the statement.
He warned that the global economy and financial markets will take a hit as trade conflicts between the US and China continue to escalate, as well as trade tensions between the US and other countries. “It is hard to predict what will happen next. There are no winners but only losers in trade wars.”
Chan added that HKMA will continue to diversify its investments amid volatility in financial markets and the US Federal Reserve’s monetary policy tightening efforts.
The assets of the Exchange Fund are managed as four portfolios – the Long-Term Growth Portfolio (holds private equity and real estate investments), the Investment Portfolio (invested primarily in bonds and equities markets of OECD countries), the Strategic Portfolio (holds shares in Hong Kong Exchanges) and the Backing Portfolio (which matches the Monetary Base, under Hong Kong’s Currency Board system).
Debt securities made up the lion’s share (69.5 percent) of the Exchange Fund’s holdings, followed by overseas equities (13.2 percent), deposits (6.5 percent), other investments (6 percent), and Hong Kong equities (4.8 percent), as of end-June.