Need for stable returns driving CIC’s private investments

China Investment Corporation president and vice-chairman, Tu Guangshao, explains why the sovereign wealth fund is increasing its alternative investments.

China Investment Corporation, the world’s second-largest sovereign wealth fund, is boosting its alternative investments and direct investments, according to vice-chairman and president Tu Guangshao, speaking at the Asian Financial Forum 2019 in Hong Kong.

“If we increase our exposure to direct investment and alternatives, we will create stable returns,” he said at a conference session, adding that this is one of the main focuses that CIC has this year.

Tu also explained that key words from CIC’s 2019 investment plan include “transformation” and “collaboration”, noting that the sovereign wealth fund plans to gain more exposure to alternatives and partner with GPs and other institutional investors.

In March 2018, Tu told Bloomberg that CIC was seeking to increase its alternative and direct investments to 45 percent or more of its overseas portfolio in the next three years.

The SWF allocated 39.3 percent of its investible assets to alternatives at the end of 2017, excluding loans made by CIC Capital. CIC managed $941 billion of total assets as of end-2017.

PDI’s requests for comment to CIC and its affiliates on private investments were not returned by publication time. A spokeswoman from CIC International declined to comment.

CIC’s overseas investment and management activities are undertaken by CIC Capital and CIC International. CIC Capital was incorporated in January 2015 and manages bilateral, multilateral and platform funds. A PwC report showed that the sovereign body set up CIC Capital to make foreign direct investments.

Another CIC subsidiary, CIC International, has existing exposure to private equity and private credit fund investments, co-investments, and minority investments, CIC’s latest annual report shows. Its private equity team oversees private credit opportunity investments.

CIC’s disclosure on its overseas portfolio stated a 17.6 percent net annual return, in dollar-terms, as of end-2017. Its 10-year investment performance was recorded as 5.94 percent, on a net cumulative annualised return basis.