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China: CIC reveals cautious US strategy

Fund’s first US holdings disclosed; 13F filing intended to “set an example”

China Investment Corporation’s first-ever disclosure of its direct US equity holdings reveals the fund’s cautious approach to investing in the US, according to a report by Shanghai-based research firm Z-Ben Advisors.

The SEC in the US requires investment managers with $100 million or more invested in securities overseen by the regulator to disclose their holdings annually on a form called 13F. CIC’s February filing of the form is a first glimpse into its US strategy, says the report, and offers interesting insights into the mindsets of the Chinese sovereign fund’s managers.

The Z-Ben report begins: "With a total of $9.6 billion in securities represented out of our estimated $110 billion total offshore investment pot, some of CIC’s long-term portfolio preferences can be discerned. However, a more careful reading of the report’s details shows remarkably little engagement with US companies and suggests that CIC’s real exposure to the US is being created through third-party mandates and other structures."

Four categories
The report divides CIC’s holdings into four categories. The first are "positional" large equity holdings in strategic targets: a total of $6 billion in Morgan Stanley, Blackrock and Teck Resources.

"All three firms," the report continues, "enjoy catbird seats from which to judge the health and direction of markets in which they are dominant players and will, no doubt, be sources of advice to CIC that may be equal in value to their returns."

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