CIC Released Annual Report 201925-09-2020
On September 25, 2020, China Investment Corporation (CIC) released the Annual Report 2019 (Annual Report) approved by the Board of Directors.
The Annual Report disclosed CIC’s performance, overseas investment activities and domestic equity management as of December 31, 2019. It also elaborated on CIC’s progress made in the past year on corporate governance, risk management, global outreach, human resources and corporate social responsibility.
Mr. Peng Chun, Chairman and CEO of CIC, said in the message that amid growing market complexity and volatility, we remained steadfast in our commitment to operating on an international, market-driven and professional basis under the leadership of our new Board of Directors and Executive Committee. We sought excellence by honing our institutional investment capabilities, driving improvements in the management of state-owned financial capital, preventing major financial risks, and unlocking vitality and stimulate growth potential. With strong implementation of the company’s Five Year Strategic Plan, CIC successfully achieved all operational targets for the year.
The Annual Report shows that in 2019 and on USD terms, the company’s overseas investments posted a net annual return of 17.41%, with investment income of USD 42.2 billion. Our annualized cumulative 10-year net return reached 6.60%, beating our 10-year performance target by 92 basis points. As of the end of 2019, the aggregate state-owned financial capital under the management of Central Huijin reached CNY 4.78 trillion. CIC’s total assets surpassed the milestone of USD 1 trillion, reaching USD 1,045.7 billion, with net assets of USD 946.9 billion.
Currently, CIC’s global portfolio consists of public equity, fixed income, alternative investments and cash products, respectively taking up 38.9%, 17.7%, 42.2%, and 1.2%.
On investment strategies, we established an Asset Allocation and Investment Policy Committee and reformed our Asset Allocation Department and renamed it as the Asset Allocation and Business Management Department, underscoring the fundamental importance and guiding role of asset allocation. CIC adopts a sound asset allocation framework with the Reference Portfolio as the anchor, which also includes the Three-year Policy Portfolio, the Annual Policy Portfolio/Target Portfolio, and the Actual Portfolio. CIC continued to focus on the construction of the total portfolio, ensuring reasonable allocations to different asset classes, optimizing the active/passive allocation for both equity and bond strategies, and implementing enhanced analysis of allocation execution in non-public markets. The total portfolio management framework was enhanced to enable more flexible and timely allocation adjustments.
On investment management, we pressed ahead with our ‘precision management’ approach to investing in public markets, with a more optimal mix of external managers and sub-portfolios, and actively sought additional sources of excess return in our public market investments. In non-public markets, we continued to make prudent investments and build up our direct investment capacity. In 2019, CIC’s incremental non-public market commitments totaled USD 17.25 billion. We also prioritized effective post-investment management and successfully exited projects that had already realized ideal returns and took robust action to dispose of distressed assets and safeguard our business interests.
On investment cooperation, we continued to strengthen our existing partnerships and build new ones, proactively pursuing win-win opportunities for joint investments with mutually complementary partners. Based on in-depth analysis of opportunities in Belt and Road Initiative, CIC successfully connected portfolio companies with the China market, contributing to enhanced investment performance. We also scaled up our investments in the new type of bilateral funds and started to see results in terms of driving post-investment value thanks to an improved management framework and operational processes. We also worked proactively to build a vibrant cross-border investment ecosystem and grew our network of partners.
On domestic equity management, Central Huijin fulfilled its mandate as an activist shareholder to make its holdings more competitive and preserve and enhance the value of state-owned financial assets. Central Huijin’s dispatched directors to its holdings played a crucial role in their corporate governance. They helped keep Central Huijin’s holdings focused on their core business, drive governance and management innovations, optimize resource allocation, and empower growth with technology. With its expertise in the market-based and professional management of state-owned financial assets, Central Huijin engaged in the reorganization of Hengfeng Bank and piloted new models for bailing out distressed financial institutions on market terms. With enhanced institutional capacity for fulfilling its mandate as an investor and a robust system to support the performance of dispatched directors, the company achieved higher quality and effectiveness in its management of state-owned financial capital. Central Huijin’s 18 holdings maintained sound operations, with steady improvement in key performance indicators and further progress in their transition to a high-quality development model.
2020 marks the 13th anniversary of CIC’s establishment. Over the past 13 years, CIC has remained true to its original aspirations and kept its missions firmly in mind. Through prudent investing overseas, CIC has established itself as a large and international sovereign wealth fund with decent performance. In the domestic equity management business, we fostered the “Huijin Model” for the management of state-owned financial capital and advocated reform of state-owned financial institutions and establishment of the modern enterprise system in an orderly manner. Our market-driven systems, professional investment teams, international network of partners and great reputation worldwide obtained through relentless efforts spanning 13 years provide a solid foundation for the long-term sustainable development of our overseas investment business and domestic equity management business.
2020 is also the most testing year for CIC since its establishment. The abrupt outbreak of the COVID-19 pandemic begot volatilities in the international financial market, international travel restrictions, more stringent regulation overseas, and deteriorating global environment for trade and investment. Fully tapping into its capabilities and advantages built over the past 13 years and guided by the general principle of steadiness and progressiveness, CIC has struck a balance between business and pandemic prevention, and steadily advanced development of all its businesses, demonstrating the resilience of a sovereign wealth fund with its actions. In the overseas investment business, CIC quickly activated an emergency management mode, timely lowered the total portfolio risk target, proactively seized investment opportunities arising from market misalignments, achieving better-than-benchmark performance in the first half of 2020. In the domestic equity management business, Central Huijin is also helping its holdings adapt to the evolving landscape, conduct forward-looking assessment of the impacts of the pandemic, keep an eye on new trends and opportunities that will emerge after the pandemic, and enhance comprehensive risk management with a strong line of defense against major risk events.
In the meantime, we endorse the vision of a community of shared future for humankind, and live up to our corporate social responsibility. Domestically, CIC rushed to aid hard-hit regions by mobilizing a wide range of financial sector resources to provide support for the real economy and societal needs. Internationally, CIC has been a strong advocate for a concerted global pandemic response. We have done our utmost to speed medical supplies and personal protective equipment to our partners, and invited Chinese medical experts to share experience in fighting the pandemic. We believe that exchange and mutual support can deepen friendships, promote collaboration and contribute to a concerted joint response to the crisis.
As a Chinese poem goes, “In a wind-torn valley, a pine tree may bend. But when the storm has passed, it will stand proud and thrive.” Faced with a once-in-a-century worldwide pandemic and global economic recession, the world needs solidarity and coordination, joint commitment and selfless efforts more than ever. We are convinced that only by rallying together and supporting one another can we defeat the virus, restore stability in the global economy, and lay a solid foundation for robust, sustainable, balanced and inclusive growth. CIC will continue to operate on an international, market-driven, and professional basis, fully leverage on its resources and strengths as China’s sovereign wealth fund, and deepen cooperation with its partners for common progress. Faced with the most severe macro conditions and market volatility since its inception, CIC will bring to bear yet greater determination, courage and commitment in elevating its operations and management to the next level and ushering in a new chapter in the company’s reform and development.
Please see CIC Annual Report 2019 for more information.