Commodity Rebound May Lead to Record Year for China's SWF

(July 23, 2010) — China’s $300 billion sovereign wealth fund may post a record year for 2009 as markets and commodities rebound.

The China Investment Corp. (CIC) will likely report a return on its global portfolio of more than 10% in its upcoming annual statement, Rachel Ziemba, London-based senior analyst at Roubini Global Economics told Bloomberg. The record year was spurred by Chairman Lou Jiwei’s investment of nearly $10 billion into commodity-related companies, such as Canada’s Teck Resources Ltd. in the second half.

In recent news, China’s SWF reported upping its emphasis on short-term performance this year, reflecting a growing attraction to more liquid investments. The CIC, which was set up in September 2007, gained 11% last year, but the fund has said it sees a challenging year ahead given the volatility in global markets. In May and June, the fund faced losses of about 10% as a result of growing equity market volatility from the European sovereign debt crisis.

Meanwhile, Temasek Holdings, Singapore’s state investment firm, reported that assets jumped 43% to $135 billion in the year to March 31. The rebound of the fund reflects the success of the globe’s sovereign wealth fund assets, which climbed 9% in 2009 from a year earlier to $3.5 trillion. The new peak also shows a trend of SWFs boosting investments in Asia to take advantage of the region’s strong economic growth. Other SWFs that have heightened investment in the region include the Qatar Investment Authority and Norway’s Government Pension Fund, the world’s second largest.