China Investment Corp. on Friday reported a 2.96% loss on the overseas portion of the Beijing-based sovereign wealth fund’s $810 billion portfolio in 2015.
It was the first year of negative returns for CIC’s overseas holdings since 2011.
Ding Xuedong, the fund’s chairman and CEO, said in a news release that sluggish economies and volatile global financial markets made 2015 a “challenging year.”
The negative returns on the fund’s overseas investments cover assets managed by two of the organization’s three investment units: CIC International Co. Ltd, which oversees investments in publicly listed assets abroad, and CIC Capital Corp., which manages private market investments.
A separate unit, Central Huijin Investment Ltd., makes equity investments in leading domestic, state-owned financial institutions.
The latest annual report, released Friday, does not detail the amount of assets managed by each of the three investment platforms.
The $810 billion value of the investment portfolio’s domestic and overseas holdings at the end of 2015 was up 8.4% from the year before.
The latest annual report showed public equities accounting for 47.5% of CIC’s global investment portfolio, up roughly 3.5 percentage points from the year before. The next biggest gainer, absolute-return strategies, or hedge funds, ended the year with 12.7% of the portfolio, up just more than 1 percentage point.
Private market “long-term” investments, meanwhile, accounted for 22.2% of the portfolio, down 4 percentage points from the year before.
For the private equity portion of those investments, CIC’s report said it worked during the year to optimize the composition of its portfolio, renewing or adding “high-performing funds” but also strengthening “post-investment management.” The report said the organization “prudently pared down or exited some investments,” generating an inflow of roughly $10.6 billion.
The annual report said CIC increased investments in real estate during the year, setting up a department focused on making direct, large-scale investments. That new division completed nine property investments in 2015, according to the report, which didn’t provide further details.
The global portfolio’s fixed-income allocation, meanwhile, ended the year little changed at 14.4% of total assets, compared with 14.6% the year before, and cash was at 3.3%, down from 3.6%.
The report showed CIC increasingly favoring developed market assets over emerging markets assets during the past year.
Allocations to emerging markets equities plunged to 11.7% of the equity portfolio at the end of 2015 from 20.9% the year before, with non-U.S. developed market equities the main beneficiaries, at 42%, up from 33.5% the year before. U.S. equities were stable around 46% of the portfolio.
Likewise, within fixed income, allocations to emerging market sovereign bonds plunged to 5.1% from 17.7% the year before, while both developed market sovereign bonds and investment-grade corporate bonds gained roughly 6 percentage points each to end the year at 64.2% and 30.7%, respectively.
Aside from real estate, infrastructure was another market segment that garnered more CIC allocations in 2015, the annual report said, noting CIC Capital actively participated in “bidding for mature assets in developed countries and selectively (considered) greenfield projects and emerging markets infrastructure assets.”
Other developments during the year included setting up a dedicated team to invest in agricultural projects, and introducing a reference portfolio into CIC’s allocation model.
Mr. Ding predicted in the report another year of sluggish growth for 2016 — an environment he said would make it tough for institutional investors to meet their long-term return objectives.