CIC increases RE investments, becomes ‘fully invested’

The preeminent sovereign wealth fund of China revealed in its 2010 annual review it had ‘essentially fully invested’ its initial $200bn of state equity culminating in increased investments in real estate among other alternative asset classes.

China Investment Corporation (CIC) increased its investments in alternative assets to 21 percent for the year 2010 from 6 percent the previous year, as it stepped up its investment activities in sectors including real estate.

The Beijing-based sovereign wealth fund responsible for diversifying China’s foreign exchange holdings with a view to obtaining higher risk-adjusted returns, revealed its sector exposures in its annual review, published yesterday.

CIC revealed the total value of its assets had grown to $409.6 billion from $332.4 billion and that its assets had generated a return of 11.7 percent for the year to 31 December with a cumulative annualized return of 6.4 percent. The overall return mirrors the fund’s return in 2009.

CIC chairman and chief executive Lou Jiwei said in the review: “2010 was a year of substantial growth and accomplishment for China Investment Corporation. As CIC fully deployed the investable capital in its global portfolio, it continued to develop its organization and build its institutional capabilities.”

CIC, which said it had become ‘essentially fully invested’ after investing $35.7 billion in 2010, almost the last of its original capital of $200 billion, said it had reduced its cash holdings significantly in favour of investments in long term assets.

These included investments in real estate, private equity, infrastructure and ‘direct concentrated investments’. “As a long-term investor, deployment of our capital in 2010 was weighted towards private equity, infrastructure and other direct investments, guided by our strategic asset allocation plan,” Jiwei said.

As at 31 December, CIC’s cash holdings stood at 4 percent of total assets, with alternative investments 21 percent, equities 48 percent and fixed income securities 27 percent.

Similar to Singaporean sovereign wealth fund The Government Singapore Investment Corporation, which also released its yearly review this week, CIC said it had increased its footprint in emerging markets.

Jiwei also said CIC’s investment professional headcount had grown to 351 staff from 246 at the start of the year “greatly strengthening our investment team and boosting our middle and back office capabilities”. This increase in numbers came as the sovereign wealth fund opened offices in Hong Kong and Toronto.

CIC made no mention, however, of a widely anticipated fresh equity injection from the state. According to the Financial Times, the fund is in line to receive up to a further $200 billion, although that is yet to be communicated officially.

See this month’s edition of PERE magazine for an in depth analysis of CIC’s real estate division, which includes thoughts from CIC’s global real estate head Collin Lau and various CIC real estate fund managers, advisors and peers including Kenny Tse, China head at Aetos Capital, Goodwin Gaw, founder of Gaw Capital and Stanley Ching, head of real estate at CITIC Capital.