CIC slows alternatives push amid uncertain market

China Investment Corporation (CIC) has slowed down its alternative investments in 2019 and may not be able to lift the allocation of the asset class to 50% by 2022, as it had been planning. 

 

The sovereign wealth fund reported strong results in its latest annual report released last Friday (September 25). Its overseas investments enjoyed a strong net annual return of 17.41% at the end of 2019, with investment income of $42.2 billion. That performance was far better than the -2.35% CIC had recorded the previous year. CIC's overall global investment portfolio rose to $345.31 billion. 

 

However, CIC saw alternative assets drop to 42.2% of its global portfolio, down from 44.1% in the year before. And while the fund had said in its annual report last year that it was planning to boost the proportion of non-public market investments to 50% two years later, that commitment did not appear in its annual report this year. 

 

When asked about whether CIC will still aim to reach the allocation goal, a senior investment executive at CIC told AsianInvestor: "It's difficult to say, it will depend on market opportunities."

 

This goal remains unchanged, but the sovereign wealth fund said achieving this in its original timeline may not be possible, because this will depend on sufficient market opportunities. It has nothing to do with investing less overseas and shifting more capital to the onshore market, the executive said.

 

CIC noted that its allocation to alternatives dropped in 2019 because the prices - and therefore value - of public stocks rose at a faster rate than those of private market assets, causing the latter to drop as a proportion of its portfolio. In addition, CIC did not identify many good investment opportunities in the private markets during the year, he said.

 

The sovereign wealth fund's alternative investments include a wide variety of assets that include hedge funds, risk parity investments, industry-wide direct investments, industry-wide private equity, private credit, resources/commodities, real estate, and infrastructure. 

 

NEW COMMITTEE

 

The fund has also undergone a change to its governance, after establishing a new asset allocation and investment policy committee in February this year.

This committee oversees the allocation of the "entire overseas portfolio, and better ensure that asset allocation objectives are being implemented across our portfolio and driving investments in line with our strategy", CIC said in its annual report.