With 11.7% 2010 Return, China's CIC Is Cautiously Optimistic

(August 4, 2011) — Last year, China’s roughly $200 billion sovereign wealth fund increased its allocation to equities and alternatives while lowering its allocation to cash, the China Investment Corp.’s (CIC) recently released 2010 annual report shows.

“The international investment environment is getting more complicated, and there’s great uncertainties towards sustained global recovery and growth,” CIC Chairman Lou Jiwei said in the fund’s 2010 annual report, referencing factors such as the eurozone crisis and soaring commodities prices. According to the CIC’s report, the fund decreased investment proportions in North America and Latin America in 2010 while upping its exposure to the Asia-Pacific region, Europe and Africa.

Additionally, the CIC’s global investment portfolio yielded a 11.7% return rate in 2010, about in line with gains achieved the previous year when returns were driven largely by heightened bets on commodities.

In terms of asset allocation, the CIC funneled money into private equity, infrastructure projects, direct investment and real estate. Meanwhile, alternative investments increased to 21% of the global portfolio from 6% in 2009.

In June, the fund revealed that it is targeting mining, real estate, and infrastructure investments in the Americas. Earlier, in April, the CIC said it is targeting emerging economies to expand its overseas investment in developing economies. Jiwei told the China Daily that the company’s board of directors plans to raise more funds to pursue expansion overseas, with a particular focus on investment in developing markets. “CIC needs to diversify asset allocation, and employ different methods to invest in different areas, in order to reduce potential risks and achieve maximum returns,” Lou told the publication.