Published August 18, 2009

CIC to invest in US mortgages, Hollywood

Email this article
Print article
Feedback

(HONG KONG) China Investment Corp (CIC), the country's US$200 billion sovereign wealth fund, is set to pour up to US$2 billion soon into the US mortgage system by hiring mandates under the US Treasury- backed Public-Private Investment Plan (PPIP), sources told Reuters.

Under the PPIP programme launched earlier this year, the US government plans to seed a number of public-private investment funds that would combine taxpayer money with private capital to buy as much as US$40 billion in toxic securities from banks.

The move came after the United States and China in late July ended their first annual 'Strategic and Economic Dialogue' where they agreed to lead the global economy out of recession and China expressed hopes for safer investments in the world's biggest economy.

'The Chinese government is always trying to seek a more ideal way to invest in US assets rather than purely buying US government bonds all the time,' said one of the sources.

'Some might think US$2 billion for a US$200 billion sovereign fund is not big money, but it can be regarded as an innovative and positive option for Chinese investment,' said the source.



The firms in talks with CIC are designated PPIP managers and include Alliance Bernstein LP, with sub-advisers Greenfield Partners LLC and Rialto Capital Management LLC; Angelo Gordon and Co LP with GE Capital Real Estate; BlackRock Inc; Invesco Ltd; Marathon Asset Management LP; Oaktree Capital Management LP; RLJ Western Asset Management LP; Trust Company of the West; and Wellington Management Co LLP, said the sources.

CIC has yet to select any firms as mandates but is expected to make a decision before the end of August, said the sources.

The sources declined to be identified as the negotiations are private and confidential. CIC declined to comment.

CIC, established by the communist government in late 2007, is keen to participate in the PPIP as it expects the US property market to start to recover gradually late this year, said the sources.

China's sovereign wealth fund may also start investing in overseas media including Hollywood production houses, a report said yesterday, citing sources close to the fund.

CIC's plan could give Beijing a direct stake in a variety of foreign media content 'from South Korean television dramas and Japanese game shows to Hollywood blockbusters', the Times of London said.

The newspaper cited its sources as saying that it had started talks with two American private equity groups that have strong media interests.

'The talks are understood to have included at least one Hollywood film production company,' the paper said.

The report came just days after CIC announced that it had lost US$6.7 billion in its global investment portfolio last year.

The fund was set up to help China find more lucrative ways to place its massive foreign exchange reserves, which stand at US$2.13 trillion and are mainly in low-yield instruments such as US Treasury bonds.

However, the fund has so far not lived up to expectations, partly because of its launch date, shortly before the onset of the global financial crisis.

The fund has also raised suspicions abroad about China's intentions, with some critics fearing that it would use its financial muscle to buy valuable assets across the globe. -- Reuters, AFP