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CIC fund seen making 5% profit

By Wang Xu (China Daily)
Updated: 2009-02-26 07:53

China Investment Corp (CIC), the nation's $200 billion sovereign wealth fund, made a profit of $10 billion in 2008, despite the bearish stock markets around the world.

Related readings:  CIC arm buying up bank shares as others sell  CIC head not keen on fresh acquisitions  CIC: Not to invest massively overseas till uncertainty clears

That would put CIC's annual return at 5 percent, whereas a number of sovereign funds have seen their asset holdings shrink, Shanghai Securities News quoted an unnamed source as saying.

CIC had invested $90 billion in highly liquid assets including treasury bonds and bank notes, which yielded $3 billion in pre-tax profit last year.

The fund declined to comment on the development.

CIC was established in 2007 to find better returns for the nation's massive foreign exchange reserves, most of which are invested in low-risk but low-yielding US treasury bonds.

It earmarked one-third of its initial money for overseas investment while the rest was saved for the domestic market.

CIC also holds stakes in leading domestic financial institutions such as China Construction Bank, which brought considerable dividends for the fund.

In contrast, the fund's first investment in Blackstone Group, a heavyweight US private equity firm, has come in for heavy criticism. It paid $3 billion for the 9.9 percent stake in Blackstone in May 2007, incurring heavy losses as financial stocks in US were battered in the financial crisis.

CIC's chairman Lou Jiwei said in December that the fund had no plan to make further investments in Western financial institutions, as it is difficult to fathom the severity of the financial turmoil.

The fund has also teamed up with Hunan Valin Iron & Steel Group to acquire Fortescue Metals Group Ltd, Australia'n iron ore exporter, Bloomberg reported.