China Investment Corp. hiring foreign fund managers
SUZHOU, China: China Investment Corp., the $200 billion Chinese sovereign wealth fund, is hiring foreign fund managers to invest in hedge funds and private equity, as well as in traditional assets like bonds and shares.
Gao Xiqing, CIC’s general manager, said Thursday that he hoped to hire the managers within the next few months.
Dozens of the world’s leading money managers have been making presentations to CIC in Beijing in recent weeks in an effort to win coveted mandates to handle some of the fund’s money.
“The hiring is going smoothly,” Gao told reporters at a pension fund forum in Suzhou, near Shanghai. “The asset classes we are hiring managers for include the cash market, fixed income, equity and hedge funds.
“We will also be hiring managers for private equity.”
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According to media reports, CIC could plough about $4 billion into a private equity fund run by the former Goldman Sachs executive, Christopher Flowers, that will focus on financial institutions weakened by the global credit crunch.
China set up the sovereign wealth fund last September to earn greater returns on part of its $1.53 trillion of foreign exchange reserves, most of which is invested in safe but low-yielding U.S. bonds.
CIC will invest only a third of its initial money overseas. It has already spent most of the rest buying investment vehicles used by the central bank to recapitalize domestic banks.
The fund, which is also busy recruiting in-house staff, moved Tuesday into plush new offices in central Beijing.
CIC has had a rocky start, drawing fierce criticism for steep losses suffered on its maiden $3 billion investment in the U.S. private equity giant Blackstone Group.
The share price of Morgan Stanley has also fallen since CIC took a $5 billion stake in the U.S. investment bank in December.
Gao said he hoped to finish hiring external money managers within a few months.
“We must negotiate terms so it needs some time,” Gao said.
The process could have been shorter if CIC had invited just a few firms to bid for the mandates.
But to ease the concern about a lack of transparency among sovereign wealth funds, CIC had invited a large number of asset management firms to apply, making selection a tougher task.
“Sovereign funds have come under a lot of pressure,” Gao said. “In fact, we didn’t need to invite everyone. We just needed to invite those top-performing ones. But we’re doing so to show we have transparency.”
Norway, Singapore and Abu Dhabi are also among the more than 20 countries with sovereign wealth funds. The International Monetary Fund estimates their worth at between $2 trillion and $3 trillion, a total that it says could reach $10 trillion by 2012.
Some Western critics fear state-owned sovereign funds will not invest for long-term commercial returns but for political purposes, building up stakes in leading companies that will give them influence in politically sensitive sectors.
The European Union said on Wednesday that sovereign funds were welcome to invest in the 27-nation bloc but that they should be more open about their motives and methods.
“Sovereign wealth fund countries must acknowledge that their growing weight in global financial markets brings responsibilities,” said Joaquín Almunia, the EU’s economic and monetary affairs commissioner.
Gao has said CIC would be a benign force in global markets, but that it was unfair to expect total transparency because of the commercial interests at its heart.
Zheng Bingwen, a pension fund expert at the Chinese Academy of Social Sciences, the government’s top research institute, said at the forum that CIC’s assets would expand rapidly, as China’s foreign exchange reserves were likely to keep growing for the next 20 years.