China Sovereign Fund to Throw More Money Out the WindowBy NegativeConvexity • Apr 18th, 2009 • Category: Top Links
Apparently, the Chinese sovereign wealth fund (China Investment Corp - or CIC) didn’t lose enough money the last time around.
They got seriously burned on investments in Morgan Stanley and Blackstone, but apparently lead man Lou Jiwei is looking to deploy funds as the market bottoms.
According to the WSJ, the fund did well last year, holding mostly risk free assets:
CIC has taken large paper losses on stakes it bought in 2007 in Morgan Stanley and Blackstone Group LP. CIC officials have said they were reluctant to invest last year in Western financial firms even as prices plunged. Much of the fund’s money available for overseas investments is believed to be in relatively low-risk assets, meaning it avoided much of the damage last year as global markets imploded.
Some analysts say CIC may have been the world’s best-performing sovereign-wealth fund last year. Mr. Lou wrote in a Chinese magazine last month that CIC had booked only “small losses” in its overseas investments in 2008, and had outperformed other sovereign funds.
Here’s my questions though: When is it ever OK to risk your sovereign wealth? If you are going to amass huge forex reserves on the backs of artificially impoverishinng your own people, shouldn’t you make certain they or their children will see that money eventually?