A research report published by Preqin earlier this year indicated that sovereign wealth funds located in Asia control 41% of the aggregate total assets of all sovereign wealth funds. The rapid growth of Asian sovereign wealth funds, particularly in China, has stimulated private equity investments domestically and, perhaps more crucially, overseas.
One of the major private equity players is the USD 332 billion China Investment Corporation (CIC). The sovereign wealth fund may increase its private equity investments (which form part of a USD 7.4 billion allocation to alternatives) in the near future as it seeks to boost its overseas investments. The Beijing-based CIC has also announced that it is recruiting more than 60 new members of staff, including opportunities within its asset allocation and private equity investment divisions. CIC invests globally in private equity and has demonstrated a preference for buyout vehicles and US managers.
The USD 130 billion National Social Security Fund - China (NSSF), has also been seeking to expand its private equity investment portfolio outside China. Assuming its overseas mandate meets approval, the sovereign wealth fund will look to invest in a globally diversified portfolio of funds of funds and will work with international managers. In the longer term, it is planning to allocate 20% of its assets under management to overseas investments. NSSF’s current allocation to private equity of 4% of total assets is below its target allocation of 10%.
The decision to raise the exposure of the National Social Security Fund - China to private equity in the long term followed the considerable increase in NSSF’s assets after receiving a cash injection from former state-owned companies. Similarly, China Investment Corporation was founded by the Chinese government with USD 200 billion in start-up capital.
More information on sovereign wealth funds and other private equity investors can be obtained through Preqin’s Investor Intelligence database.