China Investment Investing Billions in Hedge Funds

Date: Monday, August 31, 2009
Author: Bloomberg News

China Investment Corp., the country’s sovereign wealth fund, is continuing to shift its investments away from cash and is investing billions in hedge funds and private-equity funds, Chairman Lou Jiwei said.

China Investment has invested “many times” the $500 million that CIC was reported to have placed in hedge funds and private-equity firms in June, Lou said today in an interview in Beijing. He said China Investment was also investing in fund-of- funds.

Lou said Beijing-based CIC’s performance this year “has not been bad” following last year’s 2.1 percent decline in its global investments. He didn’t elaborate. China Investment Corp. had $297.5 billion in assets and had 87.4 percent of its global portfolio invested in cash and cash equivalents at the end of last year, the fund reported earlier this month.

In December, Lou said he didn’t “dare to invest in financial institutions” after losing money on investments in Blackstone Group LP and Morgan Stanley. CIC raised its stake in Morgan Stanley in June by buying an additional $1.2 billion of shares.

CIC aims to allocate $6 billion to hedge funds by the end of 2009, company adviser Felix Chee said in June. Chee, who is a special adviser to the chief investment officer of CIC, said he will initially run CIC’s hedge fund and proprietary trading effort.

Buying Shares

The fund has also been buying shares in the property and resources sectors in recent months. It plans to buy shares of Songbird Estates Plc, a London-listed company that controls the owner of more than half the buildings in the city’s Canary Wharf financial district, Songbird Chairman David Pritchard said on a conference call yesterday. Songbird, which is selling shares to institutions to repay 880 million pounds ($1.4 billion) of bank loans, said CIC will buy a significant stake.

CIC is interested in boosting its Canadian presence after buying a stake in Teck Resources Ltd. in July, the country’s Finance Minister Jim Flaherty said in an Aug. 11 interview.