China Investment Corporation (CIC) is eyeing more exposure to real estate, as the $930 billion sovereign wealth fund plans to hike alternative and direct investments to 45 percent or more of its overseas portfolio within three years, from 38 percent at the end of last year.
The strategy to diversify away from volatile public markets, such as public equities and fixed income, will also target new investments in hedge funds, infrastructure and private equity, CIC’s president Tu Guangshao revealed to Bloomberg.
Tu said that alternative and direct investments could climb to 40 percent of CIC’s overseas total by the end of 2018. He added that the world’s third-largest sovereign wealth fund will maintain “stable growth” in its portfolio of real assets including infrastructure and logistic properties.
CIC Builds on Overseas Real Estate Horde
CIC, which currently manages nearly one-third of China’s $3.1 trillion in foreign reserves, has emerged as a major player in the real estate sector since its formation in 2007. The firm landed the biggest property deal of all time by buying Blackstone’s European logistics portfolio Logicor for $13.8 billion last June.
Last month, CIC exited its investment in Blackstone 11 years after taking a $3 billion stake in the US private equity giant, concluding a gradual draw-down of its interest over the past 18 months. A CIC spokeswoman told Bloomberg that the firm had achieved a “positive return” from its Blackstone bet.
In addition to its real estate deals with Stephen Schwarzman’s New York-based alternative investment firm, CIC has bought up stakes in properties from Manhattan’s Rockefeller Center and 1 New York Plaza office tower, to a pair of French malls, a trio of British business parks and the mixed-use International Finance Center Seoul.
Property, Infrastructure Boost Returns
CIC reported a 6.22 percent return on its overseas investments in 2016, rebounding from a loss in 2015, driven in part by greater exposure to alternative assets. The company committed $5 billion to offshore real estate in 2016, accounting for 2.65 percent of its overseas portfolio.
The Beijing-based firm has also invested in infrastructure from the Port of Melbourne to North America’s biggest parking lot operator. CIC chairman Ding Xuedong said in January of last year that the company may look into infrastructure and manufacturing deals in the US, adding that the country needs more than $8 trillion in infrastructure spending.
In the Bloomberg interview, Tu said that CIC will boost alternative investments by raising allocations to some top investment firms with which it has good long-term relationships. He added that CIC is especially interested in co-investment opportunities.
The executive noted that CIC is eyeing direct investments in the US, and that most of its existing partners in the private equity space are American firms.