The FT has a story, citing a Shanghai consulting firm called Z-Ben Advisors, that the China Investment Corp. is about to fund 4 global equity managers to invest on their behalf. This follows the failure of the Chinalco/Rio Tinto investment which fell through partially because of political concerns. The author claims that rather than pursue more large deals that are likely to face resistance such as the previous rejection of a bid by CNOOC to buy Unocal, the Chinese will take a hands off approach by allocating some of their excess reserves to money managers and hedge/private equity firms.
Early last year CIC picked two or three fund management groups for each of six investment mandates, four equity and two fixed income, with an aggregate sum of $12bn. Only the global fixed income mandate was funded before the shutters came down.
The managers of the remaining five mandates have just been notified that they are finally about to be funded, in stages, over the coming weeks. A public announcement is expected imminently, according to Z-Ben Advisors, a Shanghai-based consultancy.
Z-Ben says CIC has also earmarked a further $30bn of its liquid assets for passive mandates, which will also be handed to global portfolio managers over the next 6 to 12 months.
A further $10bn could soon find itself spread globally should state authorities grant product licences to more of the 29 mutual fund ventures set up to raise money onshore and invest offshore under the Qualified Domestic Institutional Investor scheme. Only nine licences were issued until a moratorium last year.
There is also rising chatter that CIC and Safe will hand additional monies to hedge funds and private equity firms, neither of whom typically need to declare the source of their financing.
The collapse of the Chinalco/Rio deal will spark soul searching in Beijing. The irony is that it will hasten China’s push to hand bucket loads of money to foreign fund managers. And it is coming to a bourse near you soon
So far, the total is just $50 billion but the Chinese have almost $2 trillion in reserves. They can buy a lot of stock. Have we just seen the birth of the Hu Jintao put?