Business

BlackRock, China’s CIC to launch investment fund

Smokes comes out of a factory chimney in a mixed residential and industrial area of Shanghai in this file photo of November 28, 2009. BlackRock and China Investment Corp plan to launch an investment fund which might be worth several billion US dollars. – Reuters picSmokes comes out of a factory chimney in a mixed residential and industrial area of Shanghai in this file photo of November 28, 2009. BlackRock and China Investment Corp plan to launch an investment fund which might be worth several billion US dollars. – Reuters picLONDON, April 26 – BlackRock Inc, the world’s biggest asset manager, and China Investment Corp (CIC), the nation’s sovereign wealth fund, will jointly launch an investment fund likely to be worth several billion US dollars, the Financial Times said.

The fund is still in the planning stages, the FT reported, without saying where it would be investing.

One purpose of the fund would be to invest in China itself, FT said, citing Hu Bing, a senior official at CIC. The report also quoted unidentified sources as saying the fund’s main focus would be to invest in companies outside China with technologies or resources that the world’s second-largest economy needs.

CIC, set up in 2007, has a mandate to diversify part of China’s foreign currency reserves into riskier overseas assets for higher returns.

“BlackRock’s strength is in its familiarity with global markets and policies, and it can help identify acquisition targets for Chinese companies,” said Cindy Qu, an analyst at fund consultancy Z-Ben Advisors. “Meanwhile, the fund enables BlackRock to benefit from China’s outbound investment boom.”

The fund would help expand BlackRock’s footprint in Asia, where the asset manager has only a small presence outside of Japan. In China, BlackRock holds a minority stake in mutual fund house Bank of China Investment Management Co.

Officials from both BlackRock and CIC declined to comment.

Bank of America Merrill Lynch’s China chairman, Liu Erfei, will leave the bank to run the fund, the FT said, citing unidentified sources.

A Bank of America Merrill Lynch spokesman in Hong Kong declined to comment.

CIC, which managed US$410 billion at the end of 2010, has been stepping up its overseas investments in the aftermath of the global financial crisis.

Having nearly fully invested its capital, CIC has obtained an additional US$50 billion from China’s central bank, sources said in February.

The sovereign wealth fund currently oversees about 40 per cent of its global portfolio on its own, with the remainder managed by third-party asset managers.

Last October, CIC and Russian state development bank VEB agreed to commit US$1 billion each in a Russia-China Investment fund. CIC has also invested in private equity firms, including Britain’s Apax Partners and Blackstone Group.

Return on CIC’s global investment portfolio was 11.7 per cent in 2010 and the cumulative annualised return was 6.4 per cent since inception.

CIC’s portfolio allocation in 2010 was 48 per cent equities, 27 per cent fixed income, 21 per cent alternatives and 4 per cent others.

As of end-March, BlackRock’s assets under management totalled US$3.7 trillion. – Reuters

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