China Investment Corporation

CIC Invests "Many Times" More in Hedge Funds

Sovereign wealth funds are a relatively new type of alternative investor and with sovereign wealth funds holding billions of assets ready to invest in alternative investment funds, substantial capital could be allocated to hedge funds. The China Investment Corporation is a massive sovereign wealth fund with 297.5 billion in assets and it plans to devote a significant percentage of its assets to hedge funds.

In June, China Investment Corporation reportedly invested $500 million in hedge funds and private equity. Now the CIC's Chairman Lou Jiwei has said that the sovereign wealth fund has invested "many times" that initial $500 million and it hopes to invest $6 billion in hedge funds by the year's end.

The CIC is also investing in fund of funds, good news as the industry struggles to find investors. Lou said that the fund's performance "has not been bad" after 2008's 2.1% decline in its global investments. The fund took a hit to its portfolio from investments in Blackstone Group LP and Morgan Stanley, yet the CIC boosted its stake in Morgan Stanley by purchasing $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.

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. Source

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