Chairman Lou Jiwei Offers Glimpse Into China’s Sovereign Wealth Fund; Singapore’s Temasek to Create $4 Billion Investment Unit

CIC's Jiwei, a computer scientist-turned-economist, says the SWF will let its own in-house portfolio managers lead investments in developed markets. SWF Temasek will launch a new wholly owned subsidiary.

(February 11, 2010) – This year, China Investment Corp (CIC), the country’s $300 billion sovereign wealth fund, will manage more of its investments in developed markets in-house.

The announcement comes months after the fund announced a plan to invest billions in hedge funds.

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“As of now, most of CIC’s overseas funds are managed by outside portfolio managers, but we will gradually increase in-house investment in more efficient developed markets in the future,” the China Securities Journal paraphrased the fund’s chairman Lou Jiwei as saying. Nevertheless, Jiwei said he still wants to rely more on external managers for deals in emerging markets.

The SWF recently listed some of its investments in the U.S. in a regulatory filing with the U.S. Securities and Exchange Commission. At the end of last year, according to CIC’s Form 13F filing, the fund had some $9.63 billion invested in the stocks of 60 U.S. companies, including Apple, Citigroup, Coca Cola, Morgan Stanley and News Corp. The SEC filing excluded mention of CIC’s hedge fund investment and its stake in private equity house The Blackstone Group, FINalternatives reported.

CIC, created in 2007, is the world’s fifth-largest sovereign wealth fund.

In other SWF-related news, the Temasek, one of Singapore’s two SWFs, is scheduled to establish a wholly owned subsidiary, named Seatown, with a $3 billion to $4 billion available to invest when fully established, the Financial Times reported. The unit’s investments are expected to include stocks and bonds, with potential large stakes in foreign companies. The fund will focus on emerging markets with a concentration on investments within Asia.

Charles Ong, Temasek’s senior managing director and chief strategist, will head the unit, along with Nasser Ahmad, co-founder of a hedge fund based in New York, according to a Reuters report.

The fund suffered steep losses on UK and US investments during the global financial meltdown, yet its portfolio has recovered significantly in the past year. As of July 2009, Temasek has about $122 billion in assets under management.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

(February 10, 2010) — California Attorney General Edmund G. Brown Jr. criticized the state’s largest pension funds for continuing to invest in Iranian companies.

He focused his criticism on the $202.1 billion California Public Employees’ Retirement System (CalPERS), the largest public pension fund in the US, and the $134.1 billion California State Teachers’ Retirement System (CalSTRS). He asserted that the two funds have breached a state law, The California Public Divest from Iran Act, that went into effect on January 1, 2008, requiring CalPERS and CalSTRS to divest from companies in the defence, nuclear, petroleum and natural gas industries in Iran. Further, the law stipulates that the funds must divest from any company that fails to cease or limit operations in the Islamic Republic.

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According to a news release issued February 8 from the Office of the Attorney General, the funds failed to:

1. Explain whether investments in companies with ties to Iran have been reduced;

2. Describe when the funds anticipate fully divesting from these companies;

3. Summarize investments transferred to funds that exclude these companies; and

4. Calculate divestment costs or losses.

“CalPERS and CalSTRS need to honor the state law requiring them to divest from companies doing business in Iran,” Brown said to Legal Newsline, adding that the law was enacted to prevent California companies from investing in foreign companies based in states that “commit egregious violations of human rights and sponsor terrorism.”

CalSTRS spokesman Ricardo Duran said the fund has divested six or seven companies identified as doing business in Iran, such as PetroChina and Sinopec, both Chinese companies; as well as Malaysian firms Petronas and MISC Berhad” a shipping company, according to Pensions & Investments.

CalPERS has more than 1.6 million members. CalSTRS has 833,000 members.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742