BlackRock Inc, the world’s biggest asset manager, and China Investment Corp (CIC), the nation’s sovereign wealth fund, will jointly launch an investment fund likely to be worth several billion U.S. dollars, the Financial Times said.
The fund is still in the planning stages, the FT reported, without saying where it would be investing.
One purpose of the fund would be to invest in China itself, FT said, citing Hu Bing, a senior official at CIC. The report also quoted unidentified sources as saying the fund’s main focus would be to invest in companies outside China with technologies or resources that the world’s second-largest economy needs.
CIC, set up in 2007, has a mandate to diversify part of China’s foreign currency reserves into riskier overseas assets for higher returns.
“BlackRock’s strength is in its familiarity with global markets and policies, and it can help identify acquisition targets for Chinese companies,” said Cindy Qu, an analyst at fund consultancy Z-Ben Advisors. “Meanwhile, the fund enables BlackRock to benefit from China’s outbound investment boom.”
The fund would help expand BlackRock’s footprint in Asia, where the asset manager has only a small presence outside of Japan. In China, BlackRock holds a minority stake in mutual fund house Bank of China Investment Management Co.
Officials from both BlackRock and CIC declined to comment.
Bank of America Merrill Lynch‘s China chairman, Liu Erfei, will leave the bank to run the fund, the FT said, citing unidentified sources.
A Bank of America Merrill Lynch spokesman in Hong Kong declined to comment.
CIC, which managed $410 billion at the end of 2010, has been stepping up its overseas investments in the aftermath of the global financial crisis.
Having nearly fully invested its capital, CIC has obtained an additional $50 billion from China’s central bank, sources told Reuters in February.
The sovereign wealth fund currently oversees about 40 percent of its global portfolio on its own, with the remainder managed by third-party asset managers.
Last October, CIC and Russian state development bank VEB agreed to commit $1 billion each in a Russia-China Investment fund. CIC has also invested in private equity firms, including Britain’s Apax Partners and Blackstone Group.
Return on CIC’s global investment portfolio was 11.7 percent in 2010 and the cumulative annualised return was 6.4 percent since inception.
CIC’s portfolio allocation in 2010 was 48 percent equities, 27 percent fixed income, 21 percent alternatives and 4 percent others.
As of end-March, BlackRock’s assets under management totalled $3.7 trillion.
Samuel Shen and Nishant Kumar
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