Where Are CIC’s International Assets?

Ashby Monk

CIC has $110 billion dollars in its international portfolio. So, where is it? The fund has been pretty tight-lipped on the subject. Nonetheless, we got a small glimpse from a recent SEC filing, but that represented less than 10% of the fund’s assets. Interestingly, our friends at Z-Ben have just written a report on this subject; they break down the CIC’s international investments as follows (in their words):

  • USD 9.6bn of investments can be seen in the 13-F filing.
  • An equal sum invested in other markets seems to us a reasonable guess.
  • USD 6bn in PE, hedge funds and alts we believe is another reasonable guess, given long lead times to assemble a portfolio.
  • USD 20bn in money market funds (of whatever currency but likely primarily USD) is the kind of low-yield barbell component we would expect to find in any Chinese institutional investor’s portfolio.
  • USD 10bn in cash is the minimum likely reserve with which CIC would feel comfortable.
  • That leaves USD55bn. All of it, we judge, is currently invested through third-party mandates.

If true, this would mean that only around $25 billion of the CIC’s international portfolio is “strategic” and the rest is in cash, money markets or managed by others. You could even knock that down further if you discounted the PE, HF, alternatives portion, since that is likely managed externally as well. So we’re talking about less than $20 billion in CIC’s “strategic portfolio”. That doesn’t seem like much to me.

However, that may be set to change in the weeks ahead, as the CIC is reportedly set to receive a large cash injection. When?

“We’d bet dollars to donuts that State Council has already decided to go forward and only the amount and the process are in the final stages of debate… Keep your eyes open for a new round of RFI/RFP requests, likely in early Q2.”

2 Responses to “Where Are CIC’s International Assets?”

  1. 1 rien huizer March 5, 2010 at 8:20 am

    The analysis makes sense. But CIC’s asset structure does not. Why (if the cash etc are what they seem to be, assets that might as well (and more conveniently) sit in SAFE’s portfolio) have such an elaborate and high profile organization (“China’s SWF”), that in addition, itself sits on top of (and includes the results of) the China’s portfolio of dominant stakes in the local financial system. It does not look particularly rational, unless, CIC/Huijin’s mission is more complicated than just producing a higher return on reserve assets. SAFE has a bigger international equity portfolio than this, with 1% stakes in a broad cross section of non-PRC companies. But adding to CIC’s lazily managed portfolio makes even less sense (from an investment perspective) What does CIC do that adds value? Or is it about something else?

  2. 2 Ashby Monk March 5, 2010 at 4:28 pm

    CIC adds value, perhaps, by competing with SAFE. They hold each other accountable through comparison?

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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