China Investment Corporation
China Investment Corporation
Published: December 5 2007 09:03 | Last updated: December 5 2007 09:03
Wanted: managers to run $200bn portfolio. Pay not commensurate with market rates; controversy (virtually) guaranteed.
China Investment Corporation, the newest sovereign wealth fund on the block, caused a stir even before it was formally established. Its snap decision to invest $3bn in Blackstone’s initial public offering in June left it nursing a 30 per cent paper loss. Future investment policy, however, is on a back-burner while CIC concentrates on the more pressing matter of setting up shop. Top of the agenda, for now, are the basic issues of staffing, location and systems. Roll-out of international offices will provide some clues as to investment strategy. There must be decent odds on a Hong Kong office, but CIC is also mulling a presence in emerging markets, and western financial centres like London are courting CIC officials assiduously.
EDITOR’S CHOICE
UK welcome for China sovereign funds - Dec-05
Editorial comment: How to deal with sovereign funds - Oct-21
EU seeks accord on outside investors - Oct-18
Sovereign funds warning - Oct-14
FT series: Sovereign funds - Sep-19
Sovereign funds snap up bank stakes - Sep-25
Recruitment is trickier. CIC staff will technically be civil servants, whose packages can be as low as $1,000 a month. Top-ranking professionals will trump that but still take home substantially less than their Wall Street peers. Managers will also have less autonomy on investment strategy. First, the bulk of the $200bn cash-pile is already accounted for. Roughly one-third is held in domestic banks (a legacy of restructuring) and a similar amount will be used to recapitalise the two remaining unlisted big state banks. Secondly, the job is ridden with conflicts. CIC’s mandates include promoting China’s overseas expansion and rescuing domestic banks; supporting Chinese companies’ overseas initial public offerings and enhancing returns. These roles will also bring it into conflict with other mainland entities. Should CIC or the lenders it partially owns be looking at buying into distressed western financial institutions, for example? The simplest solution would be to farm management out to the private sector, but that would buck the more aggressive tone set by other sovereign wealth funds. With so many challenges and so little recompense, corporate titans like those who joined Dubai International Capital need not apply.
Copyright The Financial Times Limited 2007