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

After a 2.1% loss on its global assets in 2008, the China investment Corp. will likely post its best yearly gain in 2009, boosted by rebounding markets and investment in commodity-related companies.

(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.

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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

From ai5000 Magazine: Antoine De Salins, CEO, FFR

De Salins, CEO of France's €35 billion Fonds de Réserve pour les Retraites (FRR), spoke with ai5000 in his Paris office about liquidity issues, asset allocation, and, above all, the nuances of responsible investing.

Responsible investing: We started with this at the very beginning of the fund, in 2001. Keep in mind that responsible investing (RI) is distinct from socially responsible investing (SRI)… RI is a global strategy concerning all portfolios, part of our fiduciary duty; SRI is a technique. When we were established, there was no clear indication given by Parliament about what they meant by RI. In 2003, our first strategic asset allocation included a general point about RI—we should try, pragmatically, to incorporate collective values like sustainable development into our investments. It was positive, it was merely a signal, but it was important. Later, we launched a tender for dedicated SRI mandates—€600 million—and, in 2008, Environmental, Social, Governance (ESG) criteria were applied to the whole portfolio. The answer to that question is easy and simple: We have no liquidity constraints before 2020—we are a buffer fund—so we can be a long-term investor and try to catch the illiquidity premium. That’s why we are quite heavily exposed to high-volatility assets like equity, real estate, and commodities.

To read the rest of the magazine article, click here.

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