China fund gears up for $30bn drive [FT]
China’s $200bn sovereign wealth fund is preparing to grant mandates of as much as $30bn to international fund managers and is expected to receive another injection of capital for its offshore investments from the country’s $1,530bn in foreign exchange reserves.
China Investment Corp is about to notify shortlisted candidates from more than 100 applicants hoping to manage its investments in global equity markets and is planning to put about $4bn into a fund managed by JC Flowers, the US private equity firm, that will target ailing financial institutions.
This is why they need to make the correct decsion. The Chinese people will only put up with so many terrible investments.
China’s foreign exchange reserves are increasing by nearly $40bn a month, reaching $1,530bn by the end of December. The bulk of these funds is invested in low-risk overseas assets such as government bonds, particularly US Treasuries. Beijing has mandated CIC to make riskier investments in the hope of earning better returns on a portion of those reserves.
But CIC and the large Chinese financial institutions that have ventured abroad are under immense pressure to make smart investments rather than just shovel money out the door. CIC’s Blackstone investment has been criticised as it has lost more than 40 per cent of its value after a steep drop in Blackstone shares. Ping An Insurance, the country’s second-largest insurer, has also been blasted for its $2.7bn purchase late last year of 4.2 per cent of Belgo-Dutch financial group Fortis, whose shares have dropped about 30 per cent since then.