China sovereign wealth fund posts negative annual return on foreign investments

Despite the result, CIC still has a net cumulative annualised return of 4.58pc since inception in 2007

PUBLISHED : Friday, 22 July, 2016, 9:18pm
UPDATED : Friday, 22 July, 2016, 9:18pm

China Investment Corporation (CIC), the country’s sovereign wealth fund, recorded net loss of 2.96 per cent on overseas investments for the year ending December, which officials attributed to volatility in international financial markets and foreign exchange losses.

The result compares with a 5.47 per cent gain the year earlier,

The fund, one of the largest in the world, has now recorded a net cumulative annualised return on its overseas investments of 4.58 per cent since its inception in 2007.

Last year was the fund’s third in a row that the annual return has declined. Net cumulative annualised returns have now fallen from 5.7per cent in 2013, to 5.66 per cent in 2014, to 4.58 per cent in 2015.

The economic recovery continued on a sluggish path, big fluctuations reverberated in the international financial market, and competition in the investment industry became ever fiercer
CIC chairman Ding Xuedong

“2015 was a challenging year for both the global economy and CIC. The economic recovery continued on a sluggish path, big fluctuations reverberated in the international financial market, and competition in the investment industry became ever fiercer,” CIC chairman Ding Xuedong said in its annual financial report released on Friday.

Analysts, however, said the performance wasnt bad, put into context.

The MSCI World Index slipped three per cent last year, for instance, as expectations of US interest-rate increases and slow global growth hurt stocks, commodities and currencies.

The Goldman Sachs Commodity Index fell 32.86 per cent. The prices of crude oil and iron ore fell 36.28 per cent and 37.37 per cent, respectively. And the US dollar appreciated 9.26 per cent, whereas other currencies weakened notably.

Last year CIC increased its holding of US-listed shares to 46.32 per cent of its public-equity investment, from 45.6 per cent in end-2014, a move which experts said should help to boost its portfolio value.

But the fund raised its holding of non-US advanced economies’ equities even more, from 33.5 per cent in 2014 to 42 per cent in 2015. The weakening of euro, yen and other major currencies also put a dent on dollar-denominated value.

The financial report showed that by end-2015, it held 47.47 per cent of its portfolio in public equities, while its other included long-term investment and fixed-income products.

Abu Dhabi Investment Authority, UAE’s sovereign fund, also saw its cumulative return since inception down to 6.5 per cent, down from 7.5 per cent for the past 20-year average.

Singapore’s sovereign fund Temasek Holdings lost 9 per cent last year, but its cumulative return since inception in 1974 is 15 per cent.

In January this year, CIC set up a direct-investment unit to improve efficiency and jointly seek opportunities with Chinese companies.

Investments last year ranged from offices in Australia and shopping malls in France and Belgium, to Turkish container port Kumport and Tank & Rast, a German concessionaire of motorway service areas.

CIC on Tuesday formally named Tu Guangshao, a former deputy mayor of Shanghai, as its vice chairman and president, replacing retiring former vice chairman and general manager Li Keping.

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