Pension fund to buy more overseas assets

PUBLISHED : Thursday, 26 February, 2009, 12:00am
UPDATED : Thursday, 26 February, 2009, 12:00am

The mainland's state pension fund plans to increase overseas acquisitions this year as it seizes on falling asset values and shrugs off the country's poor investment track record abroad, a government source said.

National Council for Social Security Fund chairman Dai Xianglong had outlined plans to increase domestic and overseas investment targets for the fund this year, the source said.

Previous investment forays abroad by other mainland companies have been less than successful.

China Investment Corp's US$5 billion stake in Morgan Stanley and US$3 billion stake in Blackstone Group have shrunk more than 60 per cent since 2007.

Ping An Insurance (Group) booked a loss of 15.7 billion yuan (HK$17.8 billion) last year on a 5 per cent stake it bought in Dutch-Belgian financial firm Fortis Group for 23.9 billion yuan.

Renmin University economics professor Zhao Xijun said the fund was a long-term player and as share values evaporated worldwide, this was a good time for the fund to invest.

While the risks were uncertain because of the worsening economic climate, 'it will be too late to invest overseas once we all see a modest improvement in the global economy', Mr Zhao said.

Wei Fengchun, a deputy director of research at Jiangnan Securities, said despite the economic tough times, this could be a good period for the fund to buy overseas assets as some companies were undervalued.

The fund has invested overseas since May 2006, but the investment scale has not been disclosed.

Mr Dai said in June last year the fund would consider increasing domestic and overseas investments, possibly doubling the amount by 2010. At the end of last year, the council's asset value was 562.5 billion yuan, including the fund's 513.2 billion yuan.

Official data shows the fund's yield reached 5.25 per cent last year, including a 39 billion yuan loss on the stock market, the first since it was launched in 2000.

Over the past eight years, the fund has invested 62.8 billion yuan in stocks, gaining 4.4 billion yuan by the end of last year.

Mr Wei said the fund's performance was not particularly poor relative to other mainland investment institutions, most of which had lost 30 per cent of their assets' market value.

The fund's cumulative profit from investment soared to 160 billion yuan over the past eight years with an annualised return of 8.98 per cent. That outperformed the average inflation rate of 2.35 per cent.

The source quoted Mr Dai as saying the fund would cut investment in fixed-income products and expand its exposure to equity funds this year.

At the same time, it would actively participate in direct equity investment, including putting money into central enterprise holding companies, local high-quality, state-owned firms and infrastructure.

Mr Dai said the fund would raise money through many channels this year to consolidate funding sources.

He said the fund boosted its domestic stock holdings, buying indexed and entrusted investment in the first half of last year, as well as fixed-income products before interest rates declined.

Fair performance

Despite a huge loss on the stock market, the pension fund last year had a yield of: 5.25%