BlackRock Inc., the world’s largest money manager, plans to start a fund with China Investment Corp., according to a person familiar with the matter.
CIC, the nation’s sovereign-wealth fund, and BlackRock will initially provide capital for the investments, which would be in Chinese companies and businesses that sell products in China, said the person, who asked not to be identified because the details aren’t public. The joint venture will be managed by Liu Erh-fei, who will leave his position as chairman of Bank of America Corp.’s brokerage operations in China, the person said.
Laurence D. Fink, chairman and chief executive officer of BlackRock, said during a conference call with analysts and investors last year that the firm is interested in expanding in Asia and investor deposits there are “slower than we would like.” BlackRock, based in New York, had $3.68 trillion in assets under management as of March 31.
“BlackRock is partnering up with one of the biggest sovereign wealth funds, a big name with big connections, someone who will open doors and raise their profile,” said Fraser Howie, a Singapore-based managing director at CLSA Asia-Pacific Markets, a unit of Credit Agricole SA, and co-author of the book “Red Capitalism” on China’s financial system. “CIC is looking to diversify the way it invests, basically tying up with an established partner to try to do more things.”
Bobbie Collins, a spokeswoman for BlackRock, declined to comment. Two calls to CIC’s public-affairs office in Beijing weren’t answered. Selena Morris, a spokeswoman for Charlotte, North Carolina-based Bank of America, didn’t immediately return calls.
CIC, which was set up in 2007 with $200 billion from China’s Ministry of Finance, had $410 billion of assets at the end of 2010, according to its latest annual report. The fund posted an 11.7 percent return on its overseas investments in 2010, it said in July, comparing with the 9.6 percent gain of the MSCI World Index.
News of the fund was reported earlier by the Financial Times, quoting Hu Bing, a senior CIC official who spoke of the fund at a conference in Beijing, and unidentified people with knowledge of the matter.
The primary focus of the fund would be on companies outside of China which have technologies or resources useful to the country, the unidentified people told the FT. It could, for example, co-invest with Chinese companies in their international acquisitions or take stakes in the Chinese operations of multinational companies, they added.
In its first quarterly disclosure of U.S. stock holdings in February 2010, CIC revealed a $714 million stake in BlackRock.
CIC has been ramping up international investments to help boost returns on the country’s foreign exchange reserves and meet the nation’s thirst for resources.
In January, it bought an 8.68 percent stake in Thames Water Utilities Ltd., the biggest U.K. water and sewerage company. It will buy 25 percent of former South African politician Cyril Ramaphosa’s Shanduka Group for 2 billion rand ($252 million), the company said on Dec. 22. It also agreed to tie up with Singapore’s Global Logistic Properties Ltd. to buy 15 warehouses in Japan in December.
It had about 60 percent of its assets in the U.S., Jin Liqun, chairman of its supervisory board, told CNBC in December.
GDF Suez SA and CIC signed an agreement covering a 2.3 billion euro ($3 billion) minority investment in GDF Suez’s exploration and production division and CIC’s purchase of a 10 percent stake in a LNG liquefaction plant.
Last year, CIC committed $1 billion toward a Russian private-equity fund championed by President Dmitry Medvedev.
CIC began investing in the U.S. amid the credit crunch in 2007, buying stakes in Blackstone Group LP and Morgan Stanley that year.
CIC and Blackstone were teaming up to buy real estate-related non-performing loans being sold by Royal Bank of Scotland Group Plc, China’s 21st Century Business Herald reported in October.
The sovereign wealth manager has also invested billions in hedge- and private-equity funds, Chairman Lou Jiwei said in August 2009.