CIC Official: 2010 'Very Challenging'

By KEJAL VYAS
Global market turmoil has weighed on China Investment Corp.'s performance this year, leading to losses over the past month for the $300 billion sovereign-wealth fund, according to a leading official at the fund.

"In May and June, because of the decline in the U.S. market and European market, we had about 10% mark-to-market losses," said Jesse Wang, the fund's executive vice president and chief risk officer, offering a rare glimpse into China's often-opaque sovereign wealth fund.

This year has been "very challenging for CIC," Mr. Wang added. He was speaking at an Asian banking conference sponsored by the San Francisco Federal Reserve.

The declines come after the fund's portfolio posted a gain of about 11% in 2009, he said. Official figures for the fund's 2009 performance have yet to be published and are expected to be released in a month or two.

Outsiders watch CIC's portfolio for clues about how China is deploying its foreign exchange reserves, the world's largest at around $2.5 trillion.

The losses highlight how the fund is being hit as global markets continue their volatile ride on fears over the fiscal and debt crisis in Europe as well as concerns about global growth.

Addressing an audience of regulators and policy makers, Mr. Wang said that even the fund's fixed-income holdings, which he had hoped would protect it from heavy losses, had felt the pinch as the euro weakened against other major currencies.

CIC has about 18% of its holdings in fixed income, 24% in public equity, 18.9% with what Mr. Wang called "special situation" investments, 7% in private equity and around 9% each with hedge funds, inflation-protected securities, and cash, Mr. Wang said.

The fund this year has also looked to reduce exposure to emerging markets, which soared during the 2009 rally but cooled this year on fears of potential asset bubbles.

The official also said the fund is still looking for more capital injections from the government, a proposal that has been under consideration for a while.

CIC earlier this year said its overseas investments had a paper profit of more than $10 billion in 2009, indicating the sovereign wealth fund likely succeeded in turning around its 2008 losses.

CIC's investments in the energy and resources sectors over the past year were widely seen as wise moves as valuations plummeted during the worst of the global financial crisis.

Despite looming uncertainties over global growth and high debt levels in parts of the developed world, Mr. Wang said the fund still expects the Standard & Poor's 500 index to reach 1250, although he didn't give a timeframe for that prediction. The S&P 500 index ended Tuesday at 1062.