SWF Weekly News Roundup — CIC Ramps Up Overseas Investments

July 31, 2015 by Loch Adamson

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Great Wall of China

China Investment Corp. invested $2 billion in a group of Australian office buildings. GIC and the Hong Kong Monetary Authority released annual reports. The Qatar Investment Authority and Temasek disclosed plans for London property developments. 

CIC’s Flurry of Activity

Amidst China’s A-share meltdown, changes are afoot. In 2012 the State Administration of Foreign Exchange (SAFE) started to invest China's foreign exchange reserves worth trillions of dollars more aggressively. SAFE began to buy stocks directly on foreign exchanges, built a sizable European property portfolio and even branched into energy infrastructure. By comparison, its $746.7 billion peer China Investment Corp. (CIC) was hampered by staff turnover and struggled to close foreign deals.

Now the trend seems to be reversing. Earlier this month CIC and SAFE reportedly submitted rival bids for a group of French and Belgian shopping malls — with CIC triumphing, sealing a €1.3 billion ($1.5 billion) deal for the assets. The fund also finalized an even bigger overseas property investment this week, buying a portfolio of office buildings across Brisbane, Melbourne and Sydney from Australia-based Investa Property Group, a Morgan Stanley affiliate, for A$3 billion ($2.19 billion).

CIC is on a roll. This week the fund also launched a new foreign direct investment unit called CIC Capital. The vehicle received $5 billion in seed capital from CIC and will finance Chinese companies active overseas, particularly those involved in infrastructure and agriculture. According to reports in the Chinese media, CIC wants to expand the business to some $100 billion over the coming years.

GIC, HKMA Publish Reports

Singapore's GIC posted increased profits for fiscal 2015 — but said low returns would be the norm over the next decade. The fund's latest annual report showed its rolling 20-year annualized rate of return increased to 4.9 percent for the year ending March 31, 2015, compared with 4.1 percent last year. The sovereign wealth fund does not disclose annual returns.

The report struck a note of caution. In a joint statement, GIC President Lim Siong Gian and CIO Lim Chow Kiat said high asset prices "are likely to result in low returns over the next five to ten years." GIC increased its holdings of Asian assets from 27 percent of the portfolio to 30 percent, while Europe now accounts for 25 percent, down from 29 percent a year ago.
The Hong Kong Monetary Authority's Exchange Fund, which backs the Hong Kong dollar and invests the city's foreign exchange reserves, grew to HK$3.31 trillion ($427 billion) as of June 30, 2015, up HK$167 billion from end-2014. HKMA disclosed an income of HK$20.4 billion ($2.6 billion) for the first six months of the year. However, the fund also recorded investment losses of HK$25.1 billion over the period; this was largely due to the strength of the U.S. dollar, which negatively affected the value of HKMA’s domestic investments. 

Temasek, QIA Unveil London Plans

Canary Wharf Group, a joint venture between the $304 billion Qatar Investment Authority (QIA) and Canadian real estate investor Brookfield Property Partners, has won planning permission to develop a residential tower in London. The 57-story building will be designed by Swiss architecture firm Herzog & de Meuron. QIA and Brookfield completed their £2.6 billion ($3.89 billion) takeover of Canary Wharf in April 2015. The Herzog & de Meuron tower will be the partners' first new development on the site.

Singapore’s $194 billion Temasek Holdings is involved in planning an even more ambitious development. Temasek is part of a consortium that has applied for permission to build a 62-story building at 22 Bishopsgate in The City, London’s central financial district. In February 2015, Temasek and several partners, including AXA Real Estate Investment Managers, the property investment arm of the Paris-based insurer, paid £300 million for the Bishopsgate site, formerly the location of a failed tower development called The Pinnacle. If planning permission is granted the consortium will jointly fund the construction of the new building, which will cost an estimated £1.5 billion.

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