CIC rides bull market to 2009 profit

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CIC rides bull market to 2009 profit
China's sovereign wealth fund nets $41.6 billion after a tough 2008

By Li Qing, Caixin Online

BEIJING (Caixin Online) -- A bull market for global stocks helped lift China Investment Corp.'s overseas return on investment to 11.7% and its total return to 12.9% in 2009, according to CIC's recently released annual report.

China's sovereign wealth fund booked net profits of $41.6 billion for the year, up $18.5 billion from its results during a tumultuous 2008, based on consolidated overseas returns and profits from domestic subsidiary Central Huijin Investment Ltd.
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CIC invested $58 billion last year, reversing an investment slowdown when the global economy was weak in 2008. As a result, global assets grew to more than $332 billion from $297 billion in 2008.

CIC's official registered capital of $200 billion includes its stake in Central Huijin, which means $110 billion is available for offshore investments, said Wang Shuilin, head of the fund's public relations department.

CIC accelerated its investment pace in May 2009, as economic stimulus programs implemented by governments around the world began to bear fruit.

CIC's supervisory board chairman, Jin Liqun, said the fund is sticking to its long-term investment outlook and opting for reasonable profits rather than high profits with risk.

"If our investment income only slightly outperforms U.S. Treasury bonds, the results are not satisfactory," Jin said. "But if an institution can steadily post an 8% to 10% return on investment, that would be excellent."

By the end of 2009, CIC had offshore investment portfolios in developed and emerging economies with a market value of about $81.1 billion. The portfolios focused on stocks (36%) and bonds (26%) in open markets. Cash and cash products comprised 32%, while other investments accounted for 6%.

Given continued worldwide economic uncertainty, CIC has put more emphasis on managing credit risks. The fund in 2009 created an Operation Risk Team and ordered every department to appoint a person responsible for identifying and tracking risk.

"We will continue to face an investment environment that is filled with challenges in 2010," CIC Chairman Lou Jiwei wrote in the report. "The world's economy has not fully stabilized, and markets will remain volatile."

But Lou added that "as a long-term investor, we have full confidence in the future." See this report on Caixin Online.