China Sovereign Fund Posts Loss on Foreign Assets

(Beijing) – China's sovereign wealth fund China Investment Corp. (CIC) reported its first loss on overseas investments in four years, dragged down by falling commodity prices and non-dollar denominated assets that lost value as the US currency surged last year.

CIC's overseas investments fell 2.96 percent in value last year, representing its first such loss since 2011, it said in its 2015 annual report released on July 22.

The loss dragged the annualized return rate for its offshore investments to 4.58 percent since the fund's inception in 2007. CIC blamed the weak performance on "volatilities in international financial markets and foreign exchange losses triggered by an appreciating US dollar," Ding Xuedong, CIC's chairman and CEO, said in the report.

The fund's total assets stood at US$ 813.8 billion at the end of 2015, up from US$ 200 billion in registered capital at its founding in 2007. It has received about $80 billion in additional funding since then. CIC also revealed for the first time that its state-owned assets have grown at an annualized rate of 15.3 percent since 2007, said spokesperson Liu Fangyu.

At the end of 2015, about 47 percent of CIC's global portfolio was invested in stocks, 14 percent in fixed income products, 13 percent in hedge funds and multi-asset investments and 22 percent in long-term investments, the fund said.

CIC joins other major sovereign wealth funds in reporting negative returns last year due to a weak global economy. Singapore's sovereign fund Temasek Holdings Private Ltd. reported a negative return of 9 percent last year. Abu Dhabi Investment Authority, the sovereign fund of Abu Dhabi in the United Arab Emirates, also saw its 20-year annual rate of return slow to 6.5 percent at the end of 2015 from 7.4 percent at the end of the previous year.

"Given uncertainties like the Fed's fickleness on raising (interest) rates, Brexit and fluctuations of major currencies, 2016 is likely to be another year of sluggish growth, coupled with subdued inflation, low productivity, and lackluster trade," Ding said.

CIC was founded in 2007 as a wholly state-owned fund to invest China's swelling foreign exchange holdings. It has made over 40 real estate investments overseas in past years, including shopping centers in France and Belgium, a container port in Turkey and office buildings in Australia.

Tu Guangshao, vice mayor of Shanghai, was appointed last month as general manager and deputy chairman of the fund, replacing Li Keping who served in those posts for two years before retiring.

(Rewritten by Chen Na)