By Kane Wu
HONG KONG (Reuters) -Chinese sovereign investor China Investment Corporation (CIC) is selling about $1 billion of its private equity (PE) investment portfolio in the secondary market, two people with knowledge of the matter said.
The assets are held in a number of funds managed by eight U.S. fund managers, including Blackstone Inc and Carlyle Group, said the people.
CIC has tapped U.S. investment bank Evercore to advise on the sale and aims to complete the divestments by the end of June, they said.
The total value of the assets and the sale deadline, however, are not fixed and could change depending on market interest and pricing, said a third person with direct knowledge of the matter.
Blackstone and Carlyle declined to comment. CIC and Evercore did not respond to requests for comment.
All the sources declined to comment due to the confidentiality and sensitivity of the matter.
The first two people said CIC started discussing the sale with advisers and asset managers in late 2024 as part of efforts to optimise its investment portfolio.
Initially invested in PE funds starting in 2016 and 2017, the $1 billion in assets is coming to the end of its investment cycle, they said.
The move, however, comes as geopolitical and trade tensions, especially between Beijing and Washington, have triggered market turmoil and uncertainty.
The tensions between China and the U.S. have also spilled into the financial sector as both countries have sharpened scrutiny of some investments by the other’s financial institutions.
The Financial Times reported last week, citing unidentified sources, that Chinese state-backed funds, including CIC, were cutting off new investment in U.S. PE firms amid the escalating trade tensions between the two countries. CIC has not commented on the FT article.
Potential buyers for the CIC investments include other sovereign funds, secondary-focused asset managers, and private investors such as family offices, said the people, declining to give details.
Singaporean sovereign wealth fund GIC is among the interested buyers, said another person with knowledge of the matter. GIC declined to comment.
The portfolio could be sold altogether or in separate tranches to different buyers, depending on price negotiations, they said.
Secondary market deal volumes hit a record $160 billion last year, driven by asset sales by leveraged buyout funds that could not exit investments through M&A and initial public offerings (IPOs) in volatile markets.
Secondaries Investor, a trade publication, first reported that CIC was exploring a secondary sale of U.S. PE funds.
INVESTMENTS
Beijing-headquartered CIC, founded in 2007, is mandated to diversify China’s giant foreign exchange holdings via overseas investments.
The U.S. has been the Chinese sovereign fund’s biggest investment destination, according to its past public disclosures. CIC is an active investor in U.S. PE funds, part of so-called alternative assets, which comprise nearly half of its portfolio.
During the global financial crisis, it invested in Morgan Stanley and took a minority stake in Blackstone, which it exited in 2018.
One of CIC’s most prominent investments was in a $2.5 billion private equity fund it co-established with Goldman Sachs Group Inc, which was launched in 2017 and aimed at investing in companies that can benefit from closer U.S.-China ties.
CIC has also been in talks to invest in Goldman’s first Asia-focused PE fund, separate sources with knowledge of the fundraising said. Goldman declined to comment.
PE funds typically have an investment cycle of 10 years, but a fall in valuations has made it more difficult for them to exit investments via IPOs or trade sales since the COVID-19 pandemic.
Other capital allocators, such as endowments, pension funds and sovereign funds, have also been adjusting their portfolios, said the sources.
These allocators are typically investors in private equity funds, or their so-called limited partners.
U.S. universities, including Yale and Harvard, have explored similar financial options in recent weeks following threats by the administration of U.S. President Donald Trump to cut their federal funding.
CIC’s latest annual report shows the sovereign fund had $1.33 trillion of assets under management as of December 31, 2023. About 64% of the assets are with external managers.
U.S. stocks made up 60.29% of CIC’s overseas public market equities as of the end of 2023, the annual report shows. Public equities accounted for 33.13% of its total portfolio.
CIC’s annualised cumulative 10-year net return stood at 6.57% at the end of 2023, while its annualised cumulative net return since inception was 6.23%.
(Reporting by Kane Wu; additional reporting by Yantoultra Ngui in Singapore; Editing by Sumeet Chatterjee and Neil Fullick)
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