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Sovereign wealth fund may step up disbursals for third-party fund managers
By Karen Yip (China Daily)
Updated: 2010-02-03 08:03
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Sovereign wealth fund China Investment Corporation (CIC) is expected to use nearly 60 percent of the $250 billion capital it receives later this month for disbursals to foreign private equity firms and hedge funds.
The fund may lend as much as $150 billion in the first quarter to the third-party fund managers, said Michael McCormack, executive director at Z-Ben Advisors, a Shanghai-based company that provides research on China's fund-management industry.
McCormack said CIC would identify the funds through a public mandate over the next few months. The fund's exposure would largely be in equities that have low volatility and offer long-term returns.
The remaining $100 billion would be used for acquiring direct stakes in companies, mainly in the resources and infrastructure sectors.
CIC would favor existing companies that are in the $5-billion market capitalization range and new companies operating in the Asia-Pacific region having relatively, reasonable acquisition prices, said McCormack.
"The fund will continue to look for companies and regions that have a China story," he said.
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Industry circles are of the view that CIC would report investment returns of more than 10 percent in 2009 compared with 6.8 percent in 2008. The sovereign fund said its overseas portfolio return in 2008 was a negative 2.1 percent, reflecting huge book losses due to the global financial crisis.
In November 2009, CIC said it would invest in US power producer AES Corp and GCL-Poly Energy Holdings Ltd, China's biggest polysilicon producer.
The fund raised its 45 percent equity stake in Nobel Oil Group of Russia to 59.9 percent in the same month. It also made a $1.9 billion strategic investment in PT Bumi Resources, Indonesia's largest energy and mining operator.
