Central Banks

Go figure: Chinese financial institutions both lose and win big in 2015

The PBOC suffered the world’s biggest loss, while China Investment Corporation enjoyed the biggest gain

PUBLISHED : Wednesday, 29 June, 2016, 7:39pm
UPDATED : Wednesday, 29 June, 2016, 7:41pm

Chinese financial institutions have outpaced their global peers in terms of changing fortunes when it comes to assets under management in 2015, according to global research on investment trends.

China Investment Corporation, China’s sovereign wealth fund, ranked as the biggest gainer, as its assets under management rose by US$94 billion during the year, according to a report published last week by the Official Monetary and Financial Institutions Forum (OMFIF). The gains elevated China Investment Corporation into the No 5 spot globally in terms of assets, with nearly US$746 billion on its books.

The institution which saw the largest decline in assets was the People’s Bank of China, which saw its assets drop by US$493.2 billion.

However, the People’s Bank of China remained the world’s biggest sovereign asset holder, with foreign exchange reserves and other assets of more than US$3.4 trillion.

“Total assets under management of the 500 largest global public investors fell 2.9 per cent in 2015 to US$28.99 trillion, down US$855 billion from 2014,” the report said.

The decline was led by central banks and sovereign monetary authorities. Apart from China’s central bank, monetary authorities in the US, Japan and Saudi Arabia all saw sizeable declines.

Low oil prices and an increase in capital outflows from emerging economies at the end of 2015 contributed to the declines,” the report said, adding that accommodative monetary policy in developed countries had diminished investment returns.

“As it relates to China, it’s important to distinguish capital flight from all other movements of money,” said Brett McGonegal, chief executive of Capital Link International. “Capital flight is the single biggest threat to China and its future in the global economy.”

The OMFIF report found that there were sizeable differences between regions and institutions. “Pension funds in Asia Pacific and the Middle East increased their assets by 1.7 per cent and 4.6 per cent, respectively, while sovereign funds raised asset volumes by 2.2 per cent and 3.0 per cent. However these changes were exceeded by large asset falls for central banks in these regions,” the report said.

McGonegal added that he thought fintech was another factor leading to the drop in assets under management at public funds. “Money is seeking new managers and outlets that incorporate a blend of new technology and computers to supplant humans in order to decrease fees and emotions in the investment process. Whether through outsourcing or capital seeking new platforms I would think the gross number of assets managed by public managers will be steadily decreasing for the foreseeable future,” he said.