As a large, long-term institutional investor, CIC has always attached great importance to constructing a simple, transparent, and resilient portfolio and undertaken continuous efforts to optimize asset allocation and portfolio management. CIC focuses on asset allocation based on four principles: (a) compliance with the long-term return objectives and risk tolerance approved by the Board of Directors; (b) alignment with CIC's characteristics and investment principles and philosophies; (c) based on academic research and the practices of other investment institutions; and (d) continuous optimization and improvement through investment practice.
CIC adopts the Reference Portfolio framework, which consists of public market equities and fixed-income products obtained through passive low-cost products. The framework also included the Three-year Policy Portfolio, the Annual Policy Portfolio/Target Portfolio, and the Actual Portfolio. The Reference Portfolio serves as the anchor for the risk target of the overall portfolio and the benchmark for medium- to long-term relative performance. The Three-year Policy Portfolio makes allocations to other asset classes and active strategies and is expected to outperform the Reference Portfolio with a higher risk-return profile. The Annual Policy Portfolio/Target Portfolio takes into account the progress of alternative investment and short-term market views. The framework has improved the transparency and effectiveness of asset allocation and overall portfolio management. At present, many sovereign wealth funds, pension funds, and peer institutions in other countries are using the Reference Portfolio framework.
CIC invests in a wide range of financial products globally, including public equity, fixed income, alternative assets and cash and others. Public equity refers to equity investment in listed companies. Fixed income refers to bonds, including sovereign, corporate, and agency bonds. Alternative assets include hedge funds, risk parity investments, industry-wide direct investments, industry-wide private equity, private credit, resources/commodities, real estate and infrastructure. Cash and others includes cash, overnight deposits, and US Treasury bills.
In 2011, the Board of Directors extended our investment horizon to 10 years and adopted rolling annualized return as as a key indicator for evaluating our performance.
Global Investment Portfolio DistributionAs of 31 December 2019
Internally Managed Assets versus Externally Managed AssetsAs of 31 December 2019
In 2019, CIC overcame significant challenges and pressed ahead with making significant improvements in its institutional investment capability. The company continued to hone its ability to gauge and predict the evolution of complex market circumstances, while strengthening its asset allocation, business coordination and performance evaluation functions. In public markets, we implemented precision management over our investments with an emphasis on performance evaluation, optimized strategy composition, and improved investment efficiency. In non-public markets, we moved steadily ahead with investments and ensured that accountability for all non-public market investments was clearly assigned. In making these investments, we leveraged on our strong network of partners and our proximity to the China market to achieve high-quality implementation. Furthermore, we did a solid job in post-investment management. By strengthening our postinvestment management system, implementing a variety of management mechanisms in different categories and at different levels, and strengthening supervision, oversight and process management, we became more effective in post-investment management.
Public Market Investment
CIC seized market opportunities, optimized portfolio strategy and structure, and actively put into practice a more refined management system.
CIC monitored and analyzed each strategy, defined management rules for active and passive strategies implemented by internal and external managers, and enhanced the set-up and effectiveness of its public market investments. The company developed a “5P” framework to assess active investment managers in the public market against the criteria of platform, people, philosophy, process, and performance. Investment teams can add additional evaluation criteria on top of this base set in accordance with the specificities of their own investment strategy, as a means of building up institutional knowledge base. The application of this framework in a resultsoriented approach has helped to optimize the mix of managers and sub-strategies, push down management fees, and diversify our sources of investment excess returns in public markets. CIC has also deepened its communication and information-sharing with external managers so as to benefit from increased knowledge transfer. Internally-managed strategies were also reviewed for their alignment with the company’s overall investment strategy, differentiated competitive advantages, and economies of scale.
Fixed Income in Global PortfolioAs of 31 December 2019
Public Equity in Global Portfolio by RegionAs of 31 December 2019
Public Equity in Global Portfolio by SectorAs of 31 December 2018
Non-public market investments
CIC optimized its investments in funds, boosted its co-investment capabilities, and proceeded to make judicious investments while ensuring quality.
CIC has established relationships with leading international partners in all fields and continues to deepen its partnerships with external managers, engaging with them in multi-level and multidimensional cooperation. We are working actively on expanding our co-investment and co-sponsorship deal flow and scaling up our co-investment and co-sponsorship activities.
Private equity and private credit: Our investment strategy is to optimize fund investment and expand co-investment. We have made steady progress in private equity and private credit fund investment, with steady growth in both fund commitments and net portfolio value in line with our alternative asset allocation strategy. We continued to optimize fund composition, re-upping high-quality funds and engaging new top managers, to make the fund portfolio more diverse and balanced. We also continued to build up our co-investment capabilities, and developed a hybrid co-investment model including self-managed co-investment and outsourced co-investment to external managers. Our co-investment programme continues to grow in size and deliver outstanding returns, with strong performance in pan-industry private equity and private credit.
Real estate: Real estate continues to protect against inflation, provide long-term stable cash flows, and exhibit low correlation with other asset classes. We have put in place an enhanced end-to-end process for investing in, managing, and exiting real estate projects. We closely tracked sub-sectors and high-quality assets for alignment with long-term market trends, ability to weather market cycles, potential for long-term stable returns and resistance to price falls. Accordingly, we made both direct and indirect investments, subscribing to new funds and re-upping existing fund managers on a highly selective basis. Our proactive approach to postinvestment management contributed value growth across our diversified asset portfolio. We exercised strict investment discipline, made timely adjustments to our portfolio, and seized market windows to exit selected projects and locked in returns, thus contributing to stable yields and ensuring adequate liquidity for the total portfolio.
CIC Capital's direct investment: CIC Capital has expanded its footprint and established a comprehensive monitoring mechanism to review the audit reports of investee companies. Its overseas investment model is built on a matrix that combines key geographies and sectors. In 2019, CIC Capital approved 30 investments, with a total commitment of approximately USD 5.8 billion covering infrastructure, energy, TMT, consumer, healthcare, manufacturing, agriculture and other sectors. Tailor-made solutions and post-investment management plans were implemented for several legacy deals, based on the local market environment and project performance. By working with stakeholders and capitalizing on market windows, CIC Capital exited projects successfully and secured returns.
Infrastructure: CIC Capital deployed its capital through investment in funds, co-investment and direct investment. While continuing to expand its global pool of external managers, the company also deepened its partnership with core existing managers. On top of robust global investments in utilities and transportation, CIC Capital also explored opportunities in emerging markets, renewable energy and digital real assets. With stable and rapid growth in its infrastructure investment business, CIC Capital has devised a business model of “promoting co-investment and co-sponsorship while maintaining passive fund investment as the foundation”, and a management matrix that “integrates the investment functions' expertise in sector verticals, and the asset monitoring teams’ horizontal capabilities”, unlocking the potential of value creation.
Energy and Resources: Amid tumbling oil and commodity prices, CIC Capital closely scanned its natural resource, commodity and energy portfolio, stressed post-investment management, and maintained an appropriate exposure to the aforementioned sectors in a low oil price environment by investing in relevant funds.
Pan-industry investment: CIC Capital continued to build up its presence in the TMT (technology, media and telecom), healthcare, consumer, manufacturing, and financial technology sectors. In the TMT sector, CIC Capital focused on high technology and on the intersection between the digital economy and the upgrading of traditional industries, and successfully exited a number of projects. In the healthcare sector, the company stepped up post-investment management to help investee companies secure follow-up financing and connect with potential partners from China and abroad. In the consumer sector, CIC Capital facilitated investee companies’ connections with Chinese partners to create opportunities for value enhancement. In the manufacturing sector, CIC Capital targeted leading companies in high-growth segments for value creation. In the financial technology sector, CIC Capital leveraged on its partners' resources to empower technical advances in financial services, and invested in both upstream and downstream projects in the value chain. In addition, the company made great efforts to recruit new partners in all these industries, and accelerated its investment in sector-specific funds.
Agriculture: CIC Capital carried out in-depth study and analysis to identify sub-sectors in agriculture with good investment prospects, and refined its whole-value-chain investment strategy in line with the company’s own strengths. We actively developed our specialized business platform for overseas direct investment in agriculture, and worked to deepen cooperation with agricultural enterprises and investment institutions and build a network for international engagement and investment cooperation. Investments have been made in sub-sectors including breeding, supply chain, warehousing and logistics.
Bilateral and multilateral platform funds: CIC Capital continued to deepen its cooperation by creative means with external managers and established a number of multilateral and bilateral funds.
A key strategic initiative, allowing us to extend our footprint across the globe, deepen our international partnerships, and enhance our own institutional investment capabilities.
CIC International (Hong Kong) achieved outstanding performance, despite market volatility, by managing its portfolios proactively and prudently in accordance with established investment disciplines and research protocols. It took advantage of its presence in Hong Kong to monitor closely market dynamics in the region and across the globe and to engage in active exchanges and interactions with peer institutions. With a focus on the Guangdong-HongKong-Macau Greater Bay Area and growing reach to the Asia Pacific, CIC International (Hong Kong) explores non-public market investments and synergizes with headquarters departments in deal sourcing and post-investment management.
The Representative Office in New York took full advantage of the resources available in New York City, an international financial hub, to research the economy, policies, financial markets and regulatory trends of the region, to expand CIC’s business network, and to identify potential investment opportunities. The office built stronger links with local commercial partners in support of CIC’s investment activities across the Americas.
As of December 31 2019, the company's net return on overseas investment outperformed the annual assessment benchmark set by the Board of Directors. Its 10-year cumulative annualized net return also exceeded the long-term performance target set by the Board of Directors.
In 2019, CIC's overseas portfolio posted a net annual return of 17.41%. As of December 31, 2019, CIC had realized an annualized cumulative 10-year net return of 6.60% and an annualized cumulative net return of 6.13% since its inception on September 29, 2007 (performances above are all denominated in USD).
Investment Performance on the Global Portfolio (all measured in US$)
|Year||Net cumulative annualized return||Net annual return|
a. Net cumulative annualized returns and the annual return for 2008 are calculated since inception on 29 September 2007.