China Wealth Fund Overseas Assets Gain 6.22% on Market Rally

(Bloomberg) -- China’s $813.5 billion sovereign wealth fund posted a 6.22 percent return on its overseas investments last year, rebounding from a loss the previous year as global stocks rallied.

The return compared with a 2.96 percent decline in 2015 when commodity prices sank, Beijing-based China Investment Corp. said in its 2016 annual report released Tuesday. The gain was in line with the “close to” 6 percent return estimated in March by Chief Risk Officer Zhao Haiying. Net income, which also includes profit from stakes in China’s biggest banks, rose to $75.3 billion from $73.9 billion.

Returns for sovereign funds have rebounded as global stocks rallied. Japan’s Government Pension Investment Fund, the world’s biggest pension fund, returned 5.9 percent in the year ended March 31, recovering from its worst performance since the global financial crisis. Singaporean sovereign wealth fund GIC Pte said Monday its nominal five-year annualized return in U.S. dollars climbed to 5.1 percent from 3.7 percent.

“It’s a good performance considering the negative annual return in 2015 and the risks and uncertainties in global markets” last year, Nicholas Omondi, an associate with Shanghai-based Z-Ben Advisors Ltd., said. “It shows that the efforts taken to rebalance the international portfolio were generally successful.”

Alternative Assets

CIC, currently led by President Tu Guangshao after Chairman Ding Xuedong returned to the State Council in February, is boosting investments in private equity, real estate and hedge funds to diversify from listed companies and pursue returns above market averages, company executives said earlier this year. Alternative investments, a category created last year by combining long-term and absolute-return holdings, accounted for 37.2 percent of its overseas portfolio as of Dec. 31, the largest behind public equities, which fell 1.5 percentage points last year to 45.9 percent, according to the report Tuesday.

CIC accelerated its push into alternative investments last month, when it agreed to buy Blackstone’s European logistics property business Logicor for $13.8 billion, its largest deal. Realtor Knight Frank called the transaction a “wise investment” that can tap into demand expected from China’s Belt-and-Road initiative, which runs through much of Europe.

To further increase such investments, CIC aims to boost the capital of its direct-investment unit CIC Capital to as much as $100 billion, from $10 billion when it was set up in 2015, spokeswoman Liu Fangyu told reporters in Beijing today, without giving a timeframe. Fundraising options include overseas bond sales and special bond issuance to domestic institutions, although such plans still need government approval, according to Li Wenping, a managing director at the fund’s financial department.

CIC Capital made 16 deals last year, committing a total of $5 billion, in infrastructure projects such as ports and railway, as well as Internet and finance assets.

CIC’s cash and bank deposits fell to $8.8 billion as of Dec. 31, down from $19.3 billion a year earlier, the company said.

Total assets fell slightly from $813.8 billion a year earlier, mostly because of currency declines as domestic assets such as bank stakes held by unit Central Huijin Investment Ltd. are denominated in yuan, the company said.

To contact Bloomberg News staff for this story: Zhang Dingmin in Beijing at dzhang14@bloomberg.net.

To contact the editors responsible for this story: Sree Vidya Bhaktavatsalam at sbhaktavatsa@bloomberg.net, Peter Vercoe, Paul Panckhurst

With assistance from Zhang Dingmin