National Council for Social Security Fund, Beijing, announced in its annual report that assets for the fund totaled 856.7 billion renminbi ($131 billion) as of Dec. 31, a 10.3% increase from a year earlier.
The total increase in assets resulted from a combination of a 4.23% investment return and new inflows, according to the annual report published Thursday. (Inflation as measured by the China’s consumer price index was 3.3% for the same period.)
Compared with the previous year, when the fund reported a 16.12% investment return, performance in 2010 was hurt by exposure to Chinese stocks, as the China Securities Index 300 lost 12.5%, according to a note to clients from consultant Z-Ben Advisors on Thursday. However, “the fund was surely helped by a considerable amount of their assets being held in fixed-income and cash,” according to the note.
In the short term of the next one to three years, the NCSSF “will definitely target higher exposures in equity and alternatives, and lowering cash holdings,” Min Tha Gyaw, director at Z-Ben based in Shanghai, said in an interview. “We also expect a more aggressive move overseas” to diversify the investment portfolio away from the fund’s heavy exposure to Chinese low-yielding fixed-income securities such as government bonds.
It is estimated the fund will total 1 trillion renminbi by the end of this year and 1.5 trillion renminbi by 2015.
Separately, the NCSSF earlier this month finalized the hirings of eight managers to run a total of about 10 billion renminbi in mostly Chinese bond and equity portfolios, according to information from Z-Ben and other sources.
ICBC Credit Suisse Asset Management and Fullgoal Fund Management were both hired to each run a 2 billion renminbi active bond portfolio, possibly including corporate bonds, according to sources. Da Cheng Fund Management, GF Fund Management, HFT Investment Management, China Universal Asset Management, Yinhua Fund Management and CITIC Securities were tapped to run active equity portfolios estimated at about 1 billion renminbi each.
Information on how the mandates are funded was not available, but sources indicated the source most likely would be cash.