CIC May Select China's Biggest Fund Manager to Oversee Investments

(August 19, 2010) — China’s $332.4 billion sovereign wealth fund may select China Asset Management Co., the country’s biggest fund manager, to oversee its international investments, Bloomberg reported.

A person with direct knowledge of the matter told Bloomberg that China Investment Corp., which is responsible for managing part of the nations foreign-exchange reserves, would invest through China Asset’s Hong Kong unit. As of December 31, China Asset oversaw more than $44 billion.

According to the source, who requested anonymity as no announcement has been made, the selection would be the first time the CIC picked a Chinese firm to manage money on its behalf.

“CIC is in the process of expansion with its overseas investments in various parts of the world, and it makes sense for it to pick a local money manager to invest in certain types of overseas assets,” Peter Alexander, Principal at Z-Ben Advisors Ltd., told Bloomberg.

Late last month, the CIC reported at 11.7% return on oversees investments last year, driven partly by heightened bets on commodities to benefit from a rebound in global markets. According to the CIC, 36% of its overseas portfolio was invested in equities last year, 26% in fixed-income products, 32% was held in cash and 6% was in alternative investments, highlighting the SWF’s move toward higher-risk assets last year. In terms of geographic region, North America was the top destination for CIC’s diversified equity investments last year, accounting for 43.9%. Asia and the Pacific regions attracted 28.4%, Europe had 20.5%, Latin America had 6.3%, and Africa had 0.9%.

Globally, sovereign wealth fund assets climbed 9% in 2009 from a year earlier to $3.5 trillion, London-based research firm Preqin Ltd. said in March.