Restructuring the China Investment Corporation

Ashby Monk

Back in February, I linked to a research report by Z-Ben Advisors that predicted the CIC would undergo a complete restructuring of its portfolio; the report said the CIC would soon prioritize strategic direct investments and forego all portfolio and passive investments through fund managers. Obviously, that would be a huge change with serious implications for fund managers, target firms, and target countries.

Well, Z-Ben has just released a follow up report that offers further details and explanations about the purported reorganization.  Here’s a blurb:

“In this report, we forecast the potential shape and construction of CIC’s future portfolio, should it succeed in persuading State Council/ MoF that restructuring is wise. Our results: public-market equity exposure will take the biggest hit as CIC emphasizes other assets, while even a conservative path towards an alts- and property- dominated portfolio will quickly make CIC the world’s largest buyer in those classes.”

I think we’d all agree that this transition depends on the big unanswered question facing the CIC: will funding be renewed? Interestingly, the report suggests that the delay in the CIC’s funding renewal is due to the slow nature of the reorganization planning in the first place:

“We believe that discussion of this plan, which holds significant risks for CIC’s reception in foreign markets and for the fund’s utility as a model for other institutional investors in China, is the main reason that delays in grant- ing CIC more funding have lasted so long.”

You can download the rather provocative report here.

1 Response to “Restructuring the China Investment Corporation”

  1. 1 Rien Huizer March 10, 2011 at 12:09 pm

    The simple rely to the questions around CIC is: what is the best use of CIC’s funds for the PRC? CIC is only a vehicle. So if it gives up the pure portfolio investment role (within China Inc), will it keep its money. And for whatever it keeps, who will select the the assets to invest in? CIC’s talented youngsters? Or some fossil who believes China needs a copper mine in Zambia instead of portfolio returns? This is still CCP country! I think people picturing CIC as a delegated entity in western terms a re either naive or trying to flatter CIC’s management…

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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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