CIC to train its focus on the emerging markets
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China Investment Corp (CIC), the country's $300 billion sovereign wealth fund, will increase its portfolio in the emerging markets this year, and has achieved a good gain from several real estate deals, a senior official said on Wednesday.
"We will continue to build up our presence in the emerging markets by cooperating with local general partners," said Jin Liqun, chairman of CIC's supervisory board, told an investment forum.
The chairman has recently returned from a visit to several South American countries including Argentina, Brazil and Chile. "We are also optimistic on growth in Latin America and are prepared to increase our investment there," Jin said, adding that his impression during the short visit to Latin American countries is that they would like CIC to invest in them.
"Brazil is fast growing, but Chile and Colombia are also providing interesting opportunities for private equity investors," he said.
Though CIC is a long-term investor seeking long-term returns, Jin said the sovereign wealth fund would not pass up any good opportunities that will bring in short-term or immediate returns, and cited several of the company's deals as examples.
According to Jin, CIC's investment in a US commercial real estate project, made in the middle of 2010, earned a return of more than 40 percent by the end of the same year. He also said an investment in a US distressed-credit project has generated a return of more than 60 percent, but he didn't disclose more details.
CIC also made several real estate investments in the UK, Australia and other countries in the wake of the global financial crisis.
Lower investment yields, along with limited investment-grade stock, will lead to new opportunities for raising capital from domestic investors which was destined for overseas real estate markets, according to a new report from the international real estate consultancy Jones Lang LaSalle.
Eric Pang, head of Beijing Investment at Jones Lang LaSalle, said the gross yield for investment in China's commercial real estate sector hovers around 6 percent, which means most investors are in fact betting on the value gains of property in China instead of the net yield.
"In that case, properties in some overseas countries, such as those hit by natural disasters or financial crises, are more attractive to China's institutional investors," said Pang.
Media reports said earlier that CIC has had a considerable amount of investment in Japan, but in answer to a question from China Daily, he said that the fund has no direct investment in the country.
Wang Jianxi, executive vice-president of CIC, said at a recent forum that the return from CIC's total overseas investment exceeded 11 percent last year, compared with a return of 11.7 percent for its global investment portfolio in 2009. The fund's unaudited annualized yield has averaged 6.345 percent in the past three years.
According to the McKinsey Global Institute (MGI), the economics and business research arm of McKinsey & Company, China could account for 25 percent of global investment by 2030.
"Capital will become more expensive as it becomes more scarce. This will provide a great opportunity for China as the world's largest saver," said Richard Dobbs, a director of MGI.
