Asset AllocationOctober 2, 2024

China’s Sovereign Wealth Fund Tilts Foreign Investments Toward Alts

The China Investment Corp., which has nearly half of its foreign holdings in alternative assets, aims to capitalize on the ‘global green transformation.’

Reported by Michael Katz

Chinese sovereign wealth fund China Investment Corp. reported a 10-year annualized return of 6.57% as of the end of 2023, exceeding its target by 31 basis points and raising its total asset value to $1.33 trillion. The CIC also announced it is looking to boost returns from abroad through sustainable investing.

The CIC, which invests on a 10-year time horizon, reported that, as of the end of 2023, the state-owned financial capital entrusted to Central Huijin was 6.41 trillion yuan ($914.2 billion), an increase of 9.4% from the beginning of the year. Central Huijin Investment Ltd. is a Chinese sovereign fund company under the CIC and is owned by the State Council of China.

As of the end of 2023, the asset allocation of the CIC’s foreign investment portfolio was 48.31% to alternative assets, 31.13% to public market stocks, 16.46% to fixed income and 2.10% in cash and other investments. According to a CIC statement, it “actively innovates overseas investment methods, continues to build a global investment partnership network, and supports cross-border investment cooperation.”

The sovereign wealth fund added that it is actively looking to invest in opportunities provided by the “global green transformation” and that its sustainable investment model “formulates an operational carbon neutrality action plan and orderly advances the carbon neutrality process at the operational level.”

According to the U.S. State Department, the CIC is officially China’s only sovereign wealth fund, launched in 2007 to help diversify the country’s foreign exchange reserves. According to the report, timely information and updates on the CIC and other funds are difficult to obtain. However, according to the State Department, the CIC’s annual report published in December 2023 showed that the fund’s overseas investments earned a net return of 12.67% in 2022, lower in U.S. dollar terms than the 14.27% returned in 2021. The State Department also identified the annualized cumulative 10-year net return as 6.43%, lower than the 8.73% 10-year return through 2022, and its annualized cumulative net return since inception as 5.94%.

“CIC’s overseas investments encompass all major asset classes in international markets and span over 110 countries and regions worldwide,” according to the State Department report, which added that the distribution of the CIC’s global public equity investments was 59% in the U.S., 27% in non-U.S. developed markets and 14% in emerging markets and others.