BEIJING (Reuters) – China Investment Corp is turning its back on countries that are suspicious of sovereign wealth funds, Gao Xiqing, CIC's president and chief investment officer, said on Friday.
Gao told a mergers and acquisitions conference that CIC “has a problem” that countries are defining more industries as strategically important.
“Some think we are from a Cold War area and Red China. We are still regarded very much by many countries as a potential threat,” Gao, speaking in English, said.
“We are trying to get financial returns. If there is too much political pressure and too much unpredictability, you just go away,” he said.
“Fortunately, there are more than 200 countries in the world. And fortunately, there are many countries who are happy with us,” he added.
Gao said CIC had walked away from a potential investment in an unnamed country after its leaders flagged political concerns. “We then stopped reviewing that case,” he said.
CIC, which was set up last September to earn higher returns on a portion of China's official reserves, would soon start making investments in global equities and bonds through fund managers that it is in the process of appointing, Gao said.
In that connection, a source told Reuters earlier this week that CIC was in final talks to entrust each of eight overseas asset managers with $250-600 million worth of fixed income funds focused on emerging markets.
CIC expects to have $80-90 billion of its total assets of $200 billion available for overseas investment.
Gao said CIC had a broad investment horizon and had been looking at various opportunities across the globe.
“We've been studying all the laws and regulations in major countries,” he said.
“Sure, we are looking at energy. We are looking at clean energy and environmentally friendly investment. (We are) looking at everything cross-border except for casinos, tobacco companies or machine gun companies,” he added.
CIC has ploughed $3.2 billion into a private equity fund set up by New York-based J.C. Flowers & Co that will target financial institutions.
It took a $3 billion equity stake in private equity house Blackstone Group (BX.N: Quote, Profile, Research, Stock Buzz) before its initial public offering last year and bought a $5 billion stake in Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz).
Gao reiterated that CIC was exclusively commercially driven. It was a passive financial investor that does not seek representation on the boards of its potential targets.
He recognized that the fund needed to become more transparent but said publicity was not a goal it was seeking. Lacking experience and expertise, CIC would proceed humbly, he added.
He said CIC had come bottom of a list of sovereign wealth funds in terms of transparency. This had worried some CIC officials, who wondered whether CIC should talk to the media.
“But I said that the only reason to put you there is because they want you to talk to them. So don't talk to them,” Gao said.
“We are new and so young. Of course we are not transparent enough because we have no time to make ourselves transparent,” he said.
By Eadie Chen
(Editing by Alan Wheatley)