CIC says weak economy, soft commodity prices hit performance
The overseas investment returns of the nation's sovereign wealth fund sank last year amid a fragile world economy and soft commodity prices, according to figures released on Friday.
China Investment Corp said that net annual returns on overseas investments dropped to 5.47 percent in 2014 from 9.33 percent in 2013 and 10.6 percent in 2012.
The cumulative average annualized return on overseas holdings was 5.66 percent from 2007, when CIC was founded, through 2014.
However, CIC's overseas return rate was better than the average achieved by other major sovereign wealth funds, said Liu Fangyu, the company's spokeswoman.
As of the end of 2014, CIC's overseas portfolio stood at more than $60 billion and total assets had expanded to $746.7 billion from $653.2 billion in 2013, the report said.
"The global economy recovered at a slower speed than expected last year," Chairman and Chief Executive Officer Ding Xuedong wrote in the report.
"Yields of major financial assets slid and commodity prices tumbled, further fueling competition for good-quality projects on a global scale."
The fund increased its investment in foreign-listed stocks to 44.1 percent of the total outbound portfolio last year from 40.4 percent in 2013.
Fixed-income securities accounted for 14.6 percent of investments, compared with 17 percent in 2013.
Absolute-return investments, which include hedge funds, represented 11.5 percent, and long-term assets accounted for 26.2 percent.
United States-listed shares made up 45.6 percent of CIC's public-equity investment in 2014, down from 46.1 percent in 2013. Another 33.5 percent went into other developed countries and 20.9 percent was in emerging countries, according to the report.
CIC plans to inject $50 billion to $100 billion into its new subsidiary CIC Capital to strengthen its overseas direct investment, with a view to refining CIC's total portfolio management and enhancing investment in long-term assets, said the spokeswoman.
"CIC Capital will follow CIC's investment principles as a long-term financial investor that invests on a commercial basis and is entitled to invest globally with a focus on such sectors as infrastructure and agriculture," according to a statement.
The new subsidiary has initial funds for investment of $5 billion, all of which came from CIC.
Ding said earlier that its overseas direct investment business will complement the Asian Infrastructure Investment Bank and the $40 billion Silk Road Fund. All these lenders and investors will support the country's initiatives known as the Silk Road Economic Belt and 21st Century Maritime Silk Road.
"Unlike those two financial institutions, as a sovereign wealth fund, CIC Capital will focus on long-term investment projects to achieve sustainable business growth."
Another subsidiary, Central Huijin Investment Ltd, holds large stakes in major State-owned financial enterprises in China. By the end of last year, it had 65.52 percent of the equity in the Bank of China Ltd, 57.25 percent of China Construction Bank Corp and 47.63 percent of the China Development Bank, the policy bank, the report showed.
