China’s SWF to Shift Away From Its Long-Term Focus

(June 12, 2010) — China’s $300 billion sovereign wealth fund has upped its emphasis on short-term performance this year.

The shift away from a long-term focus for the China Investment Corp (CIC) could reflect a growing attraction to more liquid investments, such as equities, Reuters reported.

“CIC is looking at things from a shorter-than-expected time frame,” said an unidentified source to Reuters. “They have expressed that they are under pressure from above for near-term, say 1-year, performance.” Another source familiar with CIC confirmed with the news service that the CIC will focus on equity markets and alternative investments in hedge funds and private equity.

The CIC, which was set up in September 2007, gained 11% last year, but the fund has said it sees a challenging year ahead given the volatility in global markets. In May and June, the fund faced losses of about 10% as a result of growing equity market volatility from the European sovereign debt crisis.

Separately, the head of China’s $114 billion national pension fund said Thursday that the euro will survive the sovereign debt crisis, lifting the euro. The National Social Security Fund’s Chairman Dai Xianglong issued comments that the euro would gradually stabilize yet he issued caution on the dollar, saying that he expected future turbulence in the dollar as a result of widening deficits in the US. “The US fiscal deficit is still big, so there is a risk that the value of China’s forex assets will contract,” Dai said.