CIC shuffle sparks CIO succession uncertainty

China Investment Corporation, the Beijing-based $747 billion sovereign wealth fund, has reportedly appointed Tu Guangshao as vice chairman, replacing Li Keping, who will retire.

However, Li also held the post of chief investment officer, and it is unclear who will take on that role, raising the question of succession of one of CIC's most senior executives, said a Hong Kong-based fund salesman.

The appointment of Tu, previously Shanghai’s executive vice mayor, was announced internally by CIC chairman Ding Xuedong on Tuesday (June 28), according to local publication Caixin. The move was also reported by Jiefang Daily’s Shanghai Observer, a publication owned by Shanghai’s municipal government.

A CIC spokeswoman declined to comment, though it is understood that the fund might confirm the changes with an official announcement.

Despite frequent senior moves at CIC since the fund’s inception in 2007, the CIO position has had relatively few occupants. Li had held the position since 2011 and his predecessor Gao Shuqing since 2007.

The news of Li’s retirement has highlighted the question of succession, a key issue for sovereign wealth funds, said the unnamed fund salesman. It would not be a surprise if Li, at the age of 60, retired from the fund completely, but there remains a question mark over who would succeed him as CIO. 

The unnamed sales executive noted: “If you look at Singapore’s GIC, which made several senior appointments in April, nearly all were internal promotions. That provides good continuity and smooth transition.” It should be noted, however, that Singaporean civil servants are believed be among the most well paid in the world.

Still, CIC is said to be keen to more stability and longevity among its personnel. High staff turnover has left the fund struggling to institutionalise knowledge and create lasting partnership with asset managers, a source told AsianInvestor in late 2014. That said, CIC staff often get poached by private-sector firms offering higher remuneration, say industry observers.

Meanwhile, the fund salesman noted the contrast between GIC’s use of internal promotion and Korea Investment Corporation’s shake-up of senior executives this year, following the arrival of a new, externally hired CIO. Such a move could mean a challenge to institution’s “cultural fit”, he noted. 

That said, Kang Shin-woo, the former chief executive of Seoul-based Hanwha Asset Management, was hired at least partly to help draw a line under the controversial tenure of ‘Hank’ Ahn Hong-chul and achieve more stability for the fund. KIC had violated internal guidelines on Ahn's watch.

AsianInvestor had argued in January this year that Korean state institutions might achieve more longevity and stability for among their leadership if they focused more on how senior incumbents perform than sticking rigidly to term limits.

CIC’s leadership change comes ahead of the release of its annual report next month. The fund posted a 5.47% return in 2014, down from 9.33% in 2013  and 10.6% in 2012, but close to an annualised return of 5.66% since its inception.

Both Li and his predecessor, Gao Xiqing, came from the National Council for Social Security Fund (NCSSF), where they worked together from 2003 to 2007, when Li was investment department head and Gao was vice-chairman.

Li took over from Gao as vice-chairman at the NCSSF after Gao joined CIC as vice chairman and CIO from 2007 to 2011. He then transferred to CIC, again replacing Gao, firstly as CIO in 2011 and then also as vice-chairman in February 2014, as reported.

Unlike Li and Gao, Tu does not have strong ties with CIC’s existing team, but he does have substantial financial markets experience. At 57, he was appointed as Shanghai’s deputy mayor in 2007 and was promoted to executive vice mayor in February 2013.

Tu also worked for the China Securities Regulatory Commission as vice chairman from 2002-2007, and as general manager of the Shanghai stock exchange during 1997-2002.

It was rumoured that he would replace Lou Jiwei as CIC's chairman in 2013, but the state council ultimately appointed Ding to the post.