China sovereign fund CIC profit rises, seeks more US direct investment

BEIJING: China’s sovereign wealth fund China Investment Corp (CIC) posted a 1.88% rise in 2016 net profit, boosted by stronger returns from its overseas portfolio.

Profit rose to US$75.3 billion from US$73.9 billion a year earlier, its annual report showed on Tuesday. Total investment income was US$83 billion in 2016, compared with US$76.7 billion in 2015. Its accumulated annualised investment return rose to 4.76% last year.

The increase was bolstered by portfolio adjustment and high returns on stock markets in Europe and the United states, Li Wenping, managing director of CIC’s financial department, told a news conference.

The fund is seeking to increase direct investment in the United States with its newly-established New York office, spokeswoman Liu Fangyu told Reuters. That includes direct investments in infrastructure and property. Currently, 42% of CIC’s total overseas portfolio is in the United States, but mostly in public markets, she said.

“We established the US office with the mandates to explore the opportunities and establish close relationships with local partners, with the local government agencies and the local regulatory agencies,” she added.

CIC, headquartered in Beijing, was founded in 2007 to help China earn a higher return on its foreign exchange reserves. The fund reported a 6.22% return on its overseas investments in 2016, compared with a negative 2.96% in 2015.

“Eight years following the global financial crisis, major economies’ rounds of easing policies and developed countries’ sluggish economic recovery led to intensifying competition among global funds, adding pressure on investment returns,” CIC Vice-Chairman and president Tu Guangshao said in the report.

“Potential risks are the rising uncertainties of global politics and policies,” he said, referring to the outlook for 2017.

CIC invests overseas through two subsidiaries, CIC International Co and direct investment vehicle CIC Capital Corp.

CIC Capital, launched in 2015, signed 16 deals worth US$5 billion last year.

Last month, CIC signed the buyout of European warehouse firm Logicor Ltd from Blackstone Group LP for 12.25 billion euros (US$13.95 billion), Europe’s biggest private equity real estate deal.

Earlier this month, CIC joined a consortium led by TIAA Private Investments and Antarctica Capital LLC to buy InterPark LLC, the largest owner-operator of parking infrastructure in the United States from Alinda Capital Partners LLC.

CIC started with initial funding of US$200 billion. By the end of 2016, its assets had surpassed US$813.5 billion.

Profit and loss from fair value changes recorded an increase of US$23.5 billion over last year, primarily due to the reversal in fair value of financial assets, Li said.

Through its Central Huijin Investment Ltd subsidiary, CIC is a shareholder in 18 Chinese state-owned financial institutions, including the country’s largest banks such as China Development Bank Corp, Industrial and Commercial Bank of China Ltd , China Construction Bank Corp and Agricultural Bank of China Ltd , according to its annual report. - Reuters
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