China’s Sovereign Wealth Fund Reports Weaker Overseas Gains in 2020

Sovereign wealth fund China Investment Corp. (CIC) reported weaker gains on its overseas investment portfolio last year as the Covid-19 pandemic shook markets.

CIC reported an annual net return on its overseas investments of 14.1% in dollar terms in 2020, according to the company’s annual report released on Friday. That’s down from a 17.4% gain in the previous year, the second highest since the company was founded 14 years ago.

Still, Peng Chun, chairman and CEO, said the company “outperformed the market during periods of extreme volatility and achieved strong returns during market upswings.”

With $1.2 trillion in total assets, CIC is the world’s second-largest sovereign wealth fund, behind Norway’s Government Pension Fund Global, according to data provider the Sovereign Wealth Fund Institute. The Norwegian fund only reported a return of 10.9% in 2020.

CIC’s 10-year cumulative annualized net return reached 6.8% last year, exceeding its target by 128 basis points, the annual report showed.

CIC significantly increased the proportion of information technology investments in its overseas public equity portfolio to 20.4% at the end of last year, up from 17.9% a year earlier. That made the sector the largest single segment, followed by the consumer discretionary sector at 13.7% and finance at 12.9%.

In terms of investment products, alternative assets — including infrastructure, real estate, hedge funds and private equity — accounted for around 43% of the fund’s overseas portfolio at the end of 2020, with public equity at 38% and fixed-income products at 17%.

Founded in 2007, CIC has registered capital of $200 billion, raised from government bonds issued by the Ministry of Finance. CIC has three subsidiaries: CIC International Co. Ltd., CIC Capital Corp., and Central Huijin Investment Ltd. Central Huijin invests domestically, while the other two subsidiaries invest around the globe to diversify China’s foreign exchange holdings.

Central Huijin is a shareholder in 17 Chinese state-owned financial institutions, including policy bank the China Development Bank and some of the largest state-owned commercial banks. As of the end of 2020, the state-owned financial assets managed under Central Huijin grew to 5.19 trillion yuan ($791 billion), up 8.6% from the beginning of last year, the annual report showed.

Contact reporter Tang Ziyi (ziyitang@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)

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