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China's CIC loses 4.3% on global portfolio

China's sovereign investment fund had its worst year since its 2007 founding.

Story highlights

  • China's sovereign wealth fund suffered its worst year ever in 2011
  • China Investment Corp lost 4.3% on its global investment portfolio
  • CIC blamed its weaker performance in 2011 on a weak market

China's sovereign wealth fund suffered its worst year ever in 2011, losing 4.3 per cent on its global investment portfolio.

In an annual report that has become the focal point of its efforts to portray itself as a transparent institution, China Investment Corp also confirmed that it had received a $30bn capital injection from the government at the end of last year, boosting its investment firepower.

CIC was established in 2007 with money carved out from China's foreign exchange reserves and given a mandate to make investments that would generate higher returns. However, it quickly ran into concerns about its government background and so has been at pains to demonstrate that it is a long-term investor focused on profits, not politics.

In its annual report CIC emphasised that point, noting that its board decided in 2011 to make rolling 10-year annualised returns a key measure of performance.

"As a long-term investor, we are well positioned to withstand short-term volatility in markets, to pursue contrarian investments and to build long-term positions that can capture the premium for less liquidity," it said.

After a few initial missteps, including taking big stakes in Morgan Stanley and Blackstone before the global financial crisis hit their share prices, CIC's investments have performed better, losing only 2.1 per cent in a difficult 2008 and then gaining 11.7 per cent in both 2009 and 2010.

It blamed its weaker performance in 2011 on a weak market and the fact that many of its private equity holdings are still at their investment stage.

"In 2011, we built up our long-term asset portfolio and weighted it toward long-term assets. We steadily built positions in private equity investments across various industries, especially those in emerging markets," it said.

After receiving the capital injection at the end of last year, CIC had a particularly busy few months. It took stakes in France's GDF Suez , Canada's Sunshine Oilsands, UK's Thames Water Utilities, South Africa's Shanduka Group, Trinidad and Tobago's Atlantic LNG Company and Russia's Polyus Gold .

CIC managed $482bn in assets at the end of last year, according to the report. However, the bulk of that is accounted for by its control of Central Huijin, the government's main holding company for its stakes in China's biggest banks.

CIC's overseas assets -- its true measure as a sovereign wealth fund -- reached $147bn at the end of last year.