[HONG KONG] Chinese sovereign investor China Investment Corporation (CIC) is selling about US$1 billion of its private equity (PE) investment portfolio in the secondary market, two sources with knowledge of the matter said.
The assets are held in a number of funds managed by eight US fund managers, including Blackstone and Carlyle Group, said the sources.
CIC has tapped US investment bank Evercore to advise on the sale and aims to complete the divestments by the end of June, they said.
The total value of the assets and the sale deadline however are not fixed and could change depending on market interest and pricing, said a third source with direct knowledge of the matter.
Blackstone and Carlyle declined to comment. CIC and Evercore did not provide any response to requests for comment.
All the sources declined to comment due to the confidentiality and sensitivity of the matter.
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The first two sources said CIC started discussing the sale with advisers and asset managers in late 2024 as part of efforts to optimise its investment portfolio.
Initially invested in PE funds starting in 2016 and 2017, the US$1 billion in assets is coming to the end of its investment cycle, they said.
The move, however, comes as geopolitical and trade tensions, especially between Beijing and Washington, have triggered market turmoil and uncertainty.
The tensions between China and the US have also spilt into the financial sector as both countries have sharpened scrutiny of some investments by the other’s financial institutions.
The Financial Times (FT) reported last week, citing unidentified sources, that Chinese state-backed funds, including CIC, were cutting off new investment in US PE firms in response to pressure from Beijing. CIC has not commented on the FT article.
Beijing-headquartered CIC, founded in 2007, is mandated to diversify China’s giant foreign exchange holdings via overseas investments. The US has been the Chinese sovereign fund’s biggest investment destination, according to its past public disclosures.
During the global financial crisis, CIC invested in Morgan Stanley and took a minority stake in Blackstone, which it exited in 2018. CIC is an active investor in US PE funds. The so-called alternative assets comprise nearly half of its portfolio.
PE funds typically have an investment cycle of 10 years but a fall in valuations has made it more difficult for them to exit investments via initial public offerings or trade sales since the Covid-19 pandemic.
Potential buyers for the CIC investment portfolio include other sovereign funds, secondary-focused asset managers, and private investors such as family offices, said the sources, declining to give details.
The portfolio could be sold all together or in separate tranches to different buyers, depending on price negotiations, they said.
CIC’s latest annual report shows the sovereign fund had US$1.33 trillion of assets under management as at Dec 31, 2023. About 64 per cent of the assets are with external managers.
US stocks made up 60.29 per cent of CIC’s overseas public market equities as at the end of 2023, the annual report shows. Public equities accounted for 33.13 per cent of its total portfolio.
CIC’s annualised cumulative 10-year net return stood at 6.57 per cent at the end of 2023, while its annualised cumulative net return since inception was 6.23 per cent. REUTERS