The China Investment Corporation (CIC) has taken the opportunity to reorganise its investment operations and focus on less risky investments. The fledgling sovereign wealth fund, founded in September 2007 with US$200 billion in foreign reserves to invest internationally, has scrapped its equity, alternatives and fixed income divisions and created four new arms to sit alongside the strategic asset allocation and research department and report to the chief investment officer, Gao Xiqing.
The public markets department will construct portfolios of investments in equities, fixed income, commodities and cash, and will select external managers to implement these allocations. Complementing this team, the private markets group will source coinvestments and limited partnership in investments such as real estate and infrastructure, while the special investments division will seek out large-scale, concentrated investments with long time-horizons.
A tactical investments department will manage internal portfolios and absolute return strategies in public markets. According to a statement by CIC, the structural changes are part of a commitment to improve corporate governance and investment strategy, and better seize investment opportunities. The CIC would not provide the names of the heads of the new divisions or confirm which responsibilities Zhou Yuan, who was recruited from UBS investment bank in China as head of alternative investments at CIC in December 2008, would now have, or whether he remained at the fund.
The fund would also not comment on what had become of the role held by private equity head Hu Bing, who previously ran fixed income and trading at the fund, according to Reuters. The CIC is currently advertising 15 employment vacancies, for roles ranging for asset allocation and strategic research to equity, alternative and fixed income investment, operations and public relations and international cooperation.
The internal restructuring and recruitment drive started as the financial crisis began to wipe trillions from global markets. Founded to profitably invest existing foreign exchange reserves, the CIC was burnt by its investments in US financial companies at the outset of the turmoil, and seems to have largely withdrawn to carry out internal work and focus on domestic and regional investments. However in mid-April, CIC chairman Lou Jiwei talked of the fund’s interest in investing in Europe.
This followed earlier comments by CIC deputy general manager Wang Jianxi that the fund saw opportunities in the global market but was mulling how to exploit them given the political sensitivities surrounding investments by sovereign wealth funds. Jianxi repeated that CIC’s investment aims were purely financial and that it invested passively in companies and altered its strategy according to market conditions. The CIC website states that the fund “does not seek an active role in the companies in which it invests”.