(Pictured: Ding Xuedong)
There is always a bit of excitement surrounding the publication of the China Investment Corporation annual report. The CIC, after all, is not the most transparent of organisations. It now oversees US$652 billion, almost two-thirds of which is invested outside China, primarily through external managers. Hence the excitement.
Headline numbers for the report, for calendar 2013, showed a return of 9.33 per cent on CIC’s international portfolio, a figure helped by a large asset allocation shift into equities (40.4 per cent of the portfolio – up from 32 per cent at end-2012) and away – in roughly equal measures – from absolute return products, direct investments and fixed income holdings. The annual return since inception for the international portfolio was 5.70 per cent.
Of the total assets of US$652bn, those outside Central Huijin, the CIC subsidiary which owns the Government’s stakes in the major Chinese banks, totaled US$412bn. The sovereign wealth fund was launched in September 2007 with US$200 billion. The offshore investment arm was established in 2011. CIC International and CIC Huijin operate as separate entities under the one umbrella.
According to China funds management research firm Z-Ben, the report also shows how CIC drives a hard bargain when transacting with fund managers. The non-Huijin part of the portfolio last year racked up total expenses equivalent to just over 2.9bps, Z-Ben observed.
Ding Xuedong, CIOC’s chairman and chief executive, says in the report that against a complicated backdrop of “multi-speed recoveries” in major markets, CIC pursued its investment goals with prudence and discipline, while refining its investment processes.
Earlier this year, the CIC implemented its own risk management system, which it has called the CIC ‘Fengye System’, which took about two years to develop. The system is the first large-scale investment management system developed independently by CIC. It covers portfolio structure, the underlying portfolio, product library and benchmark library. It supports ‘what if’ analyses, market risk analyses and performance calculations.