After its investments in the U.S. financial industry floundered, China Investment Corporation (CIC), the nation's sovereign wealth fund, has changed tactics, focusing its attention on opportunities in emerging markets. CIC is now stepping into countries like Brazil, Mexico, and Russia to diversify its US$300 billion portfolio and gain exposure to industries it believes will profit from China's fast-growing economy.
Commodities appear to be one of CIC's primary targets as China continues to import astonishing quantities of raw materials. In October, the firm purchased a 45% stake in Russia's Nobel Oil Group for US$ 300 million. Earlier this month, CIC invested US$50 million in the initial public offering of SouthGobi Energy Resources Ltd., a Vancouver-based coal producer that owns rights to coal deposits in southern Mongolia. CIC's Chairman, Lou Jiwei, has publicly hinted at pending deals in Brazil and Mexico, through which CIC is expected buy stakes in iron ore, silver, and copper producers.
Throughout the credit crisis, CIC performed relatively well, but was disappointed by its first few investments. In 2007, the firm invested US$3 billion in Blackstone Group and another US$5 billion in Morgan Stanley. A back-of-the-envelope calculation estimates CIC's losses on these investments currently to amount to a combined US$3.9 billion, nearly a 50% drop. Luckily, the fund earned modest returns by keeping most of its holdings in cash through 2008 while making a number of investments in Chinese companies listed in Hong Kong.