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CIC needs to recruit global talent: analysts

By Wang Xinyuan (Global Times)

08:37, July 04, 2013

China Investment Corporation (CIC), the sovereign wealth fund of the world's second largest economy, should open its doors and recruit the world's top fund managers in order to improve its performance, analysts told the Global Times Wednesday.

Without this change, any new leader of the sovereign wealth fund will find it very challenging to achieve satisfactory results, they said.

The CIC chairmanship has been vacant for four months, and the reason for the lengthy vacancy is that nobody is willing to take on the huge pressure of generating a decent investment return, said Tian Yun, editor-in-chief of Macro China Information Network, a macroeconomics information portal.

"CIC is problematic in terms of positioning," Tian said, noting that the key personnel are appointed by the central government, and it's more like a political entity than a market-driven fund.

It relies on its own research team to conduct overseas investment instead of inviting the world's top fund managers to manage the assets, Tian noted.

CIC made a loss of 4.3 percent on its overseas investments in 2011, the worst result since its establishment in 2007.

By 2011, its compound annual return was 3.8 percent, according to its annual report for the year. CIC has not yet disclosed its annual report for 2012.

The results compare poorly to foreign sovereign wealth funds, He Jun, a senior analyst with Beijing-based Anbound Consulting, said in a research note sent to the Global Times on Wednesday.

Singapore's sovereign wealth fund Temasek Holdings achieved an investment return of 16.1 percent in 2011 and 12.2 percent in 2012.

CIC does not lack capital, but it does lack an experienced and capable investment team, He said.

As a sovereign wealth fund, it should be more open to recruiting global talent to manage its assets, and it should also reform its incentive plan for rewarding top staff, He said.

As of Wednesday, CIC has not yet announced its new chairman, almost a week after media reports that a senior government official is expected to take the role.

China's top leaders are to name a senior government official with a background in finance as head of CIC, media reports said on June 28 citing people with knowledge of the matter, with the official announcement expected shortly.

Ding Xuedong, a deputy secretary-general of the State Council, China's cabinet, is considered most likely to become chairman and succeed Lou Jiwei, who left CIC early this year to lead the country's Ministry of Finance.

Ding, 53, served as China's vice finance minister before being named a deputy secretary-general of the State Council.

The sovereign fund announced on May 27 that Li Xiaopeng, former vice president of Industrial and Commercial Bank of China Ltd, had replaced Jin Liqun as the chairman of the board of supervisors of CIC.

Ranked as the fifth largest sovereign wealth fund worldwide, CIC was established in 2007 with approximately $200 billion of assets under management, to help diversify China's huge foreign exchange reserves, which are mostly invested in low-return US treasury bonds.

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