China’s National Council for Social Security Fund, Beijing, recorded an investment gain of 0.85% last year after the country’s stock market tumbled as economic growth slowed and the government tightened lending to curb inflation.
The gain of 7.4 billion yuan ($1.2 billion), reported in a statement on the pension fund’s website Thursday, compares with the 32.1 billion yuan, or 4.22%, for 2010, the fund reported a year ago.
The 869 billion yuan pension fund, set up in August 2000 to plug a funding gap in China’s pension system, was hurt by a 22% slump last year in the benchmark Shanghai Composite index. Stock holdings returned an annualized 18.6% since the fund started such investments in June 2003, more than 10 percentage points higher than the yield for the entire fund, according to the statement.
Stock investments, “as long as bought at reasonable valuation levels and managed as long term investments, over the long run, can still bring higher returns than fixed-income products,” the fund said in a statement. The fund “will draw experience and lessons from the past and stick to a very prudent stance on stock investments.”
Realized investment gains totaled 43.1 billion yuan last year, representing a 5.9% yield, while fair-value losses stood at 35.7 billion yuan, according to the statement. The government added 48.3 billion yuan to the fund last year.
Equities accounted for 32% of total assets as of Dec. 31, compared with an average proportion of 19% historically, the fund said. Fixed-income products made up 51%, while another 16% of its portfolio was held in industrial investments.