These bonds (in RMB), issued by the finance ministry were either sold to the central bank through an intermediary (the Agricultural Bank of China) or directly to the public (about 15%). The CIC was funded by means of a swap between the ministry of finance and central bank with MoF issued bonds offsetting foreign assets received from. The CIC is – reportedly – already under considerable pressure to make high returns, because of its financing structure. In some cases (AXJ equities) the CIC, or the mandate-seeker must propose a suitable weighted benchmark. Netting out fees, the CIC expects returns 150-200bps above the selected equity and fixed income benchmarks (see below for details). The release of such details not only reveals the benchmarks of choice, MSCI All Country, EM, EAFE and related bond indices but also their regions of interest and projected returns. The CIC included the benchmarks and targets that it expects external managers to outperform in its recent call for proposals to manage equity and fixed income mandates. However, the fact that many funds disclose only benchmarks used and not the share of the portfolio to which they are allocated does mean that we should not read too much into benchmarks.Ĭhina’s Investment Corporation is a key case to watch. Those that have a more stabilization purpose in mind or who are at early stages of diversification process tend to be most exposed to the g-10. – The benchmarks reveal differences between the funds.
