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CIC hit by global conditions

(China Daily)

08:52, July 26, 2012

Sovereign wealth fund suffers worst performance since 2008, report says

China Investment Corp, the country's sovereign wealth fund, reported an annual loss of 4.3 percent in its overseas investment portfolio in 2011, due largely to the sluggish global economy.

It was the first loss since 2008 when the financial crisis hit, the company said in its annual report on Wednesday.

"Like many major sovereign wealth funds and global institutional investors, overseas investment was affected by an overall downturn in the global market," CIC spokesman Wang Shuilin said at a news conference in Beijing.

A case in point is Singapore's sovereign wealth fund, which has seen profits shrinking by 16 percent in the last fiscal year, with annual returns down from 4.6 percent to 1.5 percent.

CIC Chairman Lou Jiwei said the global economy remains in a fragile state.

"CIC will adhere to its prudent investment approach," and achieve good financial returns within acceptable boundaries of risk, he said in the preview of the annual report.

Total assets of CIC at the end of last year, including Central Huijin Investment, stood at $482 billion, 17.7 percent up from the previous year. The company reported a net profit, for domestic and overseas investments, of $48.4 billion, down 6 percent year-on-year.

Investment returns in 2010 reached 11.7 percent and cumulative annualized returns stood at 3.8 percent since CIC was established in September 2007.

The loss in investments, according to Wang, was mainly attributed to the fluctuating value of a number of assets, especially in the financial and energy sectors, the two largest components in the portfolio.

Financial assets accounted for 19 percent of investments and energy accounted for 14 percent.

Meanwhile, "some of the projects CIC invested in are still at the early stages," and these will mature, Wang said.

According to the report, CIC stressed its long-term vision by extending its investment horizon from 5 to 10 years last year. The company made adjustments to its asset allocation accordingly.

Long-term investments account for 31 percent in its global investment portfolio.

CIC also adjusted its organizational structure in 2011 by establishing CIC International, which specialized in the management of overseas investments. In December, $30 billion was injected into CIC International in a bid to enhance its role as a vehicle to diversify foreign exchange holdings.

China's investments overseas remain promising in the long term, experts said.

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