NCSSF outlines investment plans to 2015

May 15, 2012

China’s social security fund aims to plough up to Rmb250 billion into state-owned enterprises and private-equity funds to support the real economy.

China’s National Council for Social Security Fund (NCSSF) has unveiled plans to invest up to Rmb250 billion ($40 billion) in central state-owned enterprises and private-equity funds over the next three years.

The council made the public announcement on its website this week, with the stated aim of supporting the development of the country’s real economy while achieving steady returns.

The NCSSF had Rmb869 billion in total AUM as at the end of last year. Of this, investment in the real economy (i.e. into SOEs supervised by the central government and PE funds approved by the National Development and Reform Commission) accounts for 16%, or Rmb138 billion.

From 2012 to 2015, the council intends to acquire strategic stakes in central SOEs to drive restructuring and reform, support their M&A activities, back the development of emerging industries and small- to medium-sized enterprises, take SOEs and their subsidiaries public, and help them to expand overseas.

At the same time, NCSSF also aims to increase investment in selected PE funds with good track records, professional management and portfolio investment targets with strong potential.

The public declaration comes after NCSSF officials revealed this February that they would increase PE investment sharply in the next two or three years, noting 70% of the NSSF’s total return last year came from investments into unlisted private equity firms.

According to regulation, the cap on direct investment by the social security fund is 20% of its overall AUM, and 10% on PE funds.

Its direct investments target non-financial enterprises supervised by the State-owned Assets Supervision and Administration Commission and state-owned financial institutions supervised by the finance ministry.

By the end of last year NCSSF had made Rmb87 billion in direct investment, with accumulated gains of Rrm80 billion. Its targets include ICBC, Bank of China, PICC, Cinda Asset Management, China UnionPay, Datang Telecom and Avic International.

It also invested in Bank of Communications and China South Locomotive & Rolling Stock via secondary offerings.

In addition, as at the end of last year, NCSSF had committed capital of Rmb19.7 billion (Rmb12.5 billion paid) in 13 PE funds managed by Haitong-Fortis PE Fund Management, Bohai Capital, Hony Capital, CDH Investments, Citic Capital, Legend Capital and GP Capital.