The 2010 Preqin SWF Review - Sample Pages The 2010 Preqin Sovereign Wealth Fund Review - Sample Pages

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1 The 2010 Preqin SWF Review - Sample Pages The 2010 Preqin Sovereign Wealth Fund Review - Sample Pages 2010 Preqin Ltd 1

2 The 2010 Preqin SWF Review - Sample Pages Contents 1. Executive Summary 7 2. Data Sources / Methodology Sovereign Wealth Funds Overview 15 - Purposes of sovereign wealth funds, increasing numbers of sovereign wealth funds over time, sources of capital for sovereign wealth funds, breakdown of sovereign wealth funds by total assets, number and value of sovereign wealth funds by location, outlook for sovereign wealth funds 4. Sovereign Wealth Funds Investing in Public Equities 23 - Proportion of sovereign wealth funds investing in public equities, proportion of sovereign wealth funds investing in public equities by total assets, regional preferences and global outlook of sovereign wealth funds investing in public equities, new allocations to public equities 5. Sovereign Wealth Funds Investing in Fixed Income 29 - Proportion of sovereign wealth funds investing in fi xed income, regional preferences and global outlook of sovereign wealth funds investing in fi xed income, proportion of sovereign wealth funds investing in government and corporate fixed income, proportion of sovereign wealth funds investing in investment grade and high-yield fi xed income 6. Sovereign Wealth Funds Investing in 35 - Proportion of sovereign wealth funds investing in private equity (funds and direct), proportion of sovereign wealth funds investing in private equity by location and total assets, regional and fund type preferences of sovereign wealth funds investing in private equity 8. Sovereign Wealth Funds Investing in Infrastructure 49 - Proportion of sovereign wealth funds investing in infrastructure, proportion of sovereign wealth funds investing in infrastructure by location and total assets, direct vs. indirect investments 9. Sovereign Wealth Funds Investing in Hedge Funds 55 - Proportion of sovereign wealth funds investing in hedge funds, proportion of sovereign wealth funds investing in hedge funds by location and total assets, regional and strategic preferences of sovereign wealth funds investing in hedge funds 10. League Table 63 - Sovereign wealth funds in order of total assets under management 11. Sovereign Wealth Fund Profiles 67 - Detailed profi les of 55 sovereign wealth funds 12. Index Sovereign wealth funds by country - Figure Index 13. Other Publications and Services Other Preqin Products 7. Sovereign Wealth Funds Investing in Real Estate 41 - Proportion of sovereign wealth funds investing in real estate, proportion of sovereign wealth funds investing in real estate by location and total assets, regional and strategic preferences of sovereign wealth funds investing in real estate, direct vs. indirect investments 2010 Preqin Ltd 2

3 1. Executive Summary - Sample Pages Executive Summary In the year since the release of the 2009 edition of the Sovereign Wealth Fund Review, the world has started to see the green shoots of recovery following the onset of the global fi nancial crisis in A large rally in public markets was experienced, following their bottoming out in March 2009, helping investors recover some of their losses from the previous year. This was also the case for certain sovereign wealth funds: Norway s Government Pension Fund Global, for example, reported record-breaking returns from its equities portfolio over Aggregate Assets under Management ($tn) Fig. A: Growth in Aggregate Sovereign Wealth Fund Assets under Management: However, some sovereign wealth funds have also had to cope with government withdrawals to make up for budget defi cits and fund government spending. Russia s Reserve Fund has more than halved in size over the past year due to withdrawals by the Russian government, and is likely to be totally depleted by the end of Other SWFs, such as New Zealand Superannuation Fund, have stopped receiving annual payments from their respective governments. Increase in SWF Assets in 2010 Despite these issues affecting sovereign wealth funds, their infl uence as a large group of institutional investors has not diminished. The start of a global economic recovery has helped the aggregate assets under management of all sovereign wealth funds to reach $3.51 trillion, which represents a 9% increase from last year, confi rming that SWFs have retained their collective signifi cance in the world of institutional investors. As mentioned previously, Norway s Government Pension Fund Global has enjoyed considerable growth in the last year, and its assets under management in dollar terms have increased signifi cantly, though part of this is due to the Norwegian kroner s appreciation against the US dollar. Although the media excitement surrounding sovereign wealth funds has dampened somewhat more recently, SWFs remain an extremely important source of capital. Differences from Other Institutional Investors In an atmosphere of increased institutional investor caution, sovereign wealth funds have an especially important role to play. Unlike other institutional investors such as pension funds, many sovereign wealth funds do not have liabilities to meet and are not subject to withdrawals by external investors (although some have been subject to government withdrawals over the past year). As a result SWFs tend to have very long-term investment horizons and are often free to invest in riskier, less liquid, and alternative investments. Significant Role to Play in Alternatives At a time when fundraising for many alternative investments, for example private equity funds, continues to be very slow (private equity funds raised just $35 billion in Q compared to $53 billion in Q and $158 billion in Q4 2008), sovereign wealth funds, given their relatively few restrictions on investment, represent a vital source of potential funding. This is particularly important in the current market, with other types of institutional investor 2010 Preqin Ltd 3

4 1. Executive Summary - Sample Pages proving more reluctant to invest in the more illiquid alternative investment funds than in previous years. Fig. B: Proportion of Sovereign Wealth Funds Investing in Each Asset Class Fig. B displays the proportion of sovereign wealth funds that are known to invest in each of the asset classes of public equities, fi xed income, private equity, real estate, infrastructure and hedge funds. As can be seen, 55% of SWFs are currently active in the private equity industry. 80% of these (i.e. 44% of all SWFs) invest in private equity funds alongside any direct private investments they may make, while the remaining 20% only invest directly. Outlook for 2010 In 2010, some sovereign wealth funds that had put plans to expand diversifi cation in their portfolios on hold due to the economic downturn are likely to begin resuming these programs again, and we could see an even greater proportion of SWFs investing in alternatives as they expand beyond the traditional asset classes. Given the amounts of capital at their disposal, the sovereign wealth funds that invest in alternative assets can play an important role in the sector. One recent example of a major commitment to private equity by a sovereign wealth fund is China Investment Corporation s (CIC) secondary purchase of investor stakes in Apax Europe VII. CIC had originally offered to purchase up to 800 million of existing investor stakes in the fund, if any existing investors wished to reduce or totally withdraw their commitments and increase their liquidity. In the end, CIC purchased 685 million worth of commitments in the innovative deal. The 2010 Preqin Sovereign Wealth Fund Review Preqin released the inaugural Sovereign Wealth Fund Proportion of SWFs Review in 2008 in response to our clients in the private equity and private real estate sectors requesting a source of information on sovereign wealth fund activity in these areas. Following its release, we received hundreds of enquiries from professionals in all areas of fi nance and research that were seeking a source of data and information on the more general strategies of sovereign wealth funds, along with money managers in specifi c areas seeking intelligence. In response, we launched the 2009 edition with a comprehensive overview of entire SWF investment portfolios, including exclusive information gained directly from SWFs and their advisors. The 2010 Preqin Sovereign Wealth Fund Review is the third and most comprehensive edition yet. Alongside a general investment strategy for each investor, we also have detailed individual sections showing the plans and preferences in the following areas: Public Equities Fixed Income Real Estate Infrastructure Hedge Funds In addition, we have specific analysis sections outlining trends and activity in each of these sectors for the sovereign wealth fund universe. We hope that the 2010 Preqin Sovereign Wealth Fund Review serves to further the understanding of this class of investor, and we appreciate any feedback and comments you may have Preqin Ltd 4

5 3. Sovereign Wealth Fund Overview - Sample Pages foreign exchange reserves in countries that are net exporters, such as China, which established China Investment Corporation in Fig. 3.4: Number and Value of Sovereign Wealth Funds by Region Sources of Capital for Sovereign Wealth Funds Looking at the source of sovereign wealth funds capital, hydrocarbon export-funded SWFs make up the largest group, both by number and by aggregate assets under management. Fig. 3.2 shows that these SWFs account for 60% of the overall number and 58% of the aggregate assets under management of all SWFs. Sovereign wealth funds that have been established with revenues from the export of commodities other than hydrocarbons account for 8% of all SWFs, but only 1% of their aggregate value. Such funds include Chile s two SWFs (funded through copper exports) and Botswana s Pula Fund (funded through diamond and mineral exports). Sovereign wealth funds that are not fi nanced by revenues from the export of commodities account for 32% of the total number of SWFs and 41% of their aggregate assets under management. Most of these are funded through countries offi cial international reserves and some (generally those established with the purpose of contributing to future public pension payments) receive annual contributions from the national budget. However, in certain cases, such as New Zealand Superannuation Fund, these payments have ceased in light of the economic downturn. Assets under Management of Sovereign Wealth Funds The largest sovereign wealth funds each manage hundreds of billions of dollars. Although it has never released information on its assets under management, Abu Dhabi Investment Authority is likely the largest SWF in the world. The next two largest SWFs are Norway s Government Pension Fund Global and China s SAFE Investment Company. The three largest SWFs together are estimated to manage well over $1 trillion in assets. At the other end of the size scale, 11% of sovereign wealth funds have less than $1 billion in total assets, as shown in Fig One example is Kiribati s Revenue Equalization Reserve Fund, which was established in 1956 to manage revenues from phosphate exports and has around $400 million in assets under management. Its total assets have fallen as a result of the global economic downturn, as the government has made withdrawals from the fund to fi ll the budget defi cit. Approximately a quarter of sovereign wealth funds have $50 billion or more in assets under management, and 16% have $100 billion or more. Just under a third of SWFs manage assets of less than $10 billion. Number and Value of Sovereign Wealth Funds by Region Asia and MENA are home to the largest numbers of sovereign wealth funds, and account for 57% of all SWFs between them. Furthermore, funds based in the two regions make up three-quarters of the aggregate value of all SWFs worldwide, as shown in Fig. 3.4, demonstrating that some of the largest SWFs in the world are based in these regions. The next most signifi cant region is Europe (including the two Russian SWFs), with SWFs based there 2010 Preqin Ltd 5

6 7. SWFs Investing in Real Estate - Sample Pages Sovereign Wealth Funds Investing in Real Estate Sovereign wealth funds are among some of the largest investors in real estate, with substantial amounts of capital available to allocate to the asset class. Some of the more sophisticated SWFs not only have the capital but also the resources to invest across the real estate spectrum, gaining exposure to direct, public and private real estate instruments. This section discusses the ways in which SWFs are allocating to real estate and their investment preferences. Proportion of Sovereign Wealth Funds Investing in Real Estate SWFs from around the world allocate to the real estate asset class. 51% of SWFs are known to be active in the real estate market, investing through a number of routes, including private and public real estate. This includes Government of Singapore Investment Corporation (GIC), which has an extensive property portfolio spanning the globe and invests in higher-risk private equity real estate strategies. 39% of SWFs are known not to invest in real estate. This includes some of the recently formed organizations that have yet to formulate investment strategies for alternative assets, as well as the more conservative SWFs that only allocate to traditional assets such as equities and fi xed income. Proportion of Sovereign Wealth Funds Investing in Real Estate by Total Assets The larger, more sophisticated and well-established SWFs are more likely to invest in real estate. This is because these institutions are interested in expanding and diversifying their investment portfolios and have the assets and resources to take more risks in order to grow their assets and presence around the world. Over half of SWFs that have total assets of $10-49 billion invest in real estate. 60% of those with assets in the range of $50-99 billion allocate to the asset class and 80% of those with assets of $ billion do. Of those SWFs that have total assets of more than $250 billion, 75% allocate to property. This includes Abu Dhabi Investment Authority which has estimated assets of up to $625 billion (although it has never released fi gures on its size) and is believed to allocate 5-10% of its assets to real estate. Its property allocation is thought to be split 65% to direct property, 5% to listed real estate and the remaining 30% to private real estate funds. Fig. 7.1: Proportion of Sovereign Wealth Funds Investing in Real Estate Fig. 7.2: Proportion of Sovereign Wealth Funds Investing in Real Estate by Total Assets Proportion of SWFs Total Assets 2010 Preqin Ltd 6

7 11. Profiles of Sovereign Wealth Funds - Sample Pages Bahrain Real Estate Preferences Core Core-Plus Value Added Opp. Debt Dist. F o Fs Secondaries Bahrain Mumtalakat Holding Company Year Established: 2006 Addax Tower, Building No. 1006, 5th and 6th Floors, Road 2813, The Seef District, 428, Bahrain Tel: Fax: contactus@bmhc.bh Bahrain Mumtalakat Holding Company is the main investment arm of the government of Bahrain. Mumtalakat is an active shareholder and investor in diverse business and industry sectors in more than 35 commercial enterprises, nationally and internationally, from aluminium production to property development, tourist sites to food production, and real estate to telecommunications. Source of Capital: Hydrocarbon Total Funds Under Management 14,000 USD (mn) Subsequent to the recent global financial crisis, Bahrain Mumtalakat Holding Company scaled down investments in some areas of its portfolio and the fund took on increased responsibility for the stabilisation of its domestic economy. Mumtalakat has focused on domestic investments since last year, but is open to global investments in sectors such as tourism. Thus far, investments outside Bahrain have been concentrated in the Middle East. In general, Mumtalakat targets investments in air transportation, airports, aluminium, banks, construction, fishing and seafood, glass manufacturing, healthcare services, insurance, marine transportation, ports, real estate, renewable energy, telecommunication, tourism and hotels, transportation services, utilities, and water desalination and supply. Looking forward and with an aim to diversify, Mumtalakat will likely target investments in commodities, including food, financial services, telecoms and tourism in Asia, Europe and the US. Equities Preferences Large Cap Mid Cap Small Cap N. America Europe Asia MENA Other Global Bahrain Mumtalakat Holding Company is an active investor in equities. It has invested almost exclusively in the wider Middle East region, including taking shares in companies in Kuwait, Saudi Arabia, Libya and Jordan. For example, it took a 16.7% stake in Gulf Investment Corporation, a Kuwaiti-based financial institution promoting private enterprise and supporting economic growth in the Gulf Cooperation Council (GCC) region. The sovereign wealth fund also invests domestically. Preferences Buyout Venture Distressed PE Mezzanine F o Fs Secondaries Other N. America Europe Asia MENA Other Emerging Managers No Bahrain Mumtalakat Holding Company has been active in direct private equity investments, but has yet to invest in funds. Its direct investments include, among others, full ownership of Gulf Air, Bahrain Airport Company and Bahrain Real Estate Company (Edamah). As of January 2010, Bahrain Mumtalakat Holding Company had still not decided whether it would enter the private equity market and anticipated a decision to be made by Q N. America Europe Asia MENA Other Emerging Managers The majority of Bahrain Mumtalakat Holding Company s real estate investments are in direct local property. It also owns Egyptian property company Al Awali Real Estate and Bahrain Real Estate Company. In May 2009, the sovereign wealth fund announced that it would be expanding its investments in real estate to include not only international investments but also third-party fund managers. The sovereign wealth fund was interested in committing to real estate funds in order to diversify its portfolio. It was also interested in purchasing direct properties in international markets where it believed that declining property prices had created a favourable investment climate. It was particularly interested in Japan, the US and the UK. These investments would be a part of its long-term target of investing 50% of its total assets in international markets across different asset classes. Infrastructure Preferences Greenfield Brownfield Secondary Stage Economic Social PPP/PFI F of Fs N. America Europe Asia MENA OECD Other Emerging Managers Bahrain Mumtalakat Holding Company is an extensive investor in the infrastructure asset class both in Bahrain and internationally. The sovereign wealth fund only invests directly in infrastructure projects and infrastructure-orientated companies and subsequently has no exposure to the asset class via either unlisted or listed infrastructure vehicles. Mumtalakat specifically targets infrastructure opportunities in airports, healthcare, renewable energy, sea ports, telecoms, transportation, utilities, waste management and water-related assets. The sovereign wealth fund demands diversity within its infrastructure portfolio and therefore invests nationally, regionally and globally in both economic and social sectors. Mumtalakat has discussed the possibility of investing in unlisted infrastructure funds, but it remains unsure of whether it will utilise this route to market in the future. Notable Holdings Firm Name Public/Private Firm Location Stake Aluminum Bahrain (Alba) Public Bahrain 77.0% Bahrain Airport Company Private Bahrain 100.0% Bahrain Real Estate Investment Company Private Bahrain 100.0% Batelco Public Bahrain 36.7% Gulf Air Private Bahrain 100.0% Gulf International Bank Public Bahrain 12.1% Gulf Investment Corporation Public Kuwait 16.7% McLaren Group Private UK 30.0% National Bank of Bahrain Private Bahrain 49.0% Contact Name Position Telephone Ahmed Al-Rayes Investment Manager ahmed.alrayes@bmhc.bh Talal Al-Zain CEO talal.alzain@bmhc.bh Patrick Beckett VP, Risk Management patrick.beckett@bmhc.bh Ahmed Janahi Analyst ahmed.janahi@bmhc.bh Serge Lepine CIO serge.lepine@bmhc.bh 2010 Preqin Ltd * = Fund Target 7

8 11. Profiles of Sovereign Wealth Funds - Sample Pages China China Investment Corporation Year Established: 2007 New Poly Plaza, 1 Chaoyangmen Beidajie, Dongcheng District, Beijing, , China Tel: +86 (0) Fax: +86 (0) invest@china-inv.cn Established in 2007, China Investment Corporation (CIC) is one of the largest sovereign wealth funds in the world. CIC was created following a decision by the Chinese government to make better use of the country s foreign reserves, and to reduce the amount of capital it holds in US currency. The government of China founded CIC with USD 200 billion in start-up capital. CIC reports directly to China s State Council. In terms of its investments, CIC has three different departments: Central Huijin Investment Corporation for domestic financial investments, China Jianyin Investment Company for the management of domestic assets and the disposal of non-performing loans, and a third department for foreign investments. Source of Capital: Non-Commodity Total Funds Under Management 290,000 USD (mn) Established in 2007, China Investment Corporation is a relatively new sovereign wealth fund that has invested fairly aggressively since its inception. It is predominantly a long-term investor and aims to achieve the maximum possible returns while maintaining a reasonable level of risk. CIC s investment portfolio is well diversified by geography and strategy, investing in both developed and emerging markets. It comprises three main investment categories: equity, fixed income and alternative assets, where alternative investments include hedge funds, private equity, commodities, real estate and, most recently, infrastructure. In April 2009 CIC reorganised its investment department into four new sub-departments in order to improve both its efficiency and its investment strategy: Tactical Investment Department, Special Investments Department, Private Market Investment Department, and Public Market Investment Department. These four departments replace CIC s previous departments, which were the Equity Investment, Fixed Income Investment, and Alternative Investment departments. Following this reorganisation in June 2009, CIC commenced a global recruitment drive. It was looking to fill 33 positions across the fund, with four positions available in its private market department. By Q all but three positions were filled. CIC aims to have a broad investment horizon and is looking at various opportunities across the globe. In 2010, CIC reportedly plans to maintain its strategic asset allocation strategy. It appears to be seeking more investments in commodities and resource-related industries in developing markets such as Brazil and Mexico as well as Africa, Asia, North America and Australia. It is also likely to increase its investments in private equity and hedge funds if it receives a capital injection from the Chinese government. CIC is planning to steadily increase its foreign investments in 2010, and, going forward, is looking to move towards managing its investments in developed overseas markets in-house. The majority of its overseas portfolio is currently managed by external investment managers. Equities Preferences Large Cap Mid Cap Small Cap N. America Europe Asia MENA Other Global Fixed Income Preferences Government Corporate T-Bills High Yield Investment Grade N. America Europe Asia MENA Other Global CIC invests in a variety of fixed income instruments allocating approximately 9% of its total assets to such investments. CIC has looked to award several fixed income investment mandates to external managers since its inception in 2007, including seeking managers for global fixed income and emerging markets fixed income strategies. Preferences Distressed Buyout Venture Mezzanine F o Fs Secondaries Other PE N. America Europe Asia MENA Other Emerging Managers Yes CIC actively invests in private equity both via funds and direct investments. CIC made its first private equity investment in Q1 2008, committing USD 4 billion to a buyout fund managed by JC Flowers & Co. The commitment represented 80% of the fund s total capital and was one of the largest private equity fund commitments made to date. In December 2008, CIC appointed Zhou Yuan as its head of alternative investments, responsible for direct investments and real estate. In April the following year, Hu Bing was named CIC's head of private equity. In July 2009, it was reported that CIC had agreed to purchase a 40% stake in Hong Kong-based private equity firm CITIC Capital Holdings. The sovereign wealth fund was expected to invest approximately HKD 2 billion for the holding. While its fund investments are likely to remain focused on international opportunities, the investment in CITIC provides CIC with exposure to the domestic private equity market. In February 2010, the CIC invested EUR 685 million in Apax Europe VII through the purchase of stakes from existing limited partners in the fund. The deal also includes a 2.3% stake for CIC in the UK-based private equity firm. This follows CIC's offer to purchase up to EUR 800 million of existing LP stakes in the fund in Q CIC is expecting to receive a capital injection of USD billion from the Chinese government, according to recent reports. CIC may allocate up to 60% of the capital to international private equity and hedge fund investments, allowing CIC to invest much more capital in the asset classes. CIC will be looking to increase its investments in the secondary market over In February 2010 the sovereign wealth fund allocated USD 1.5 billion to secondary market private equity investments in three USD 500 million secondary market mandates to be managed by Lexington Partners, Goldman Sachs and Pantheon Ventures. CIC was looking to make secondary purchases of buyout and venture capital fund interests. CIC was aided by investment consultants StepStone Group, Credit Suisse and Parish Capital in the manager selection process. As of December 2009, China Investment Corporation reportedly had USD 9.63 billion invested in US equity holdings. Amongst CIC s US stock investments are stakes in BlackRock and in Morgan Stanley. CIC originally invested USD 5 billion of convertible bonds in Morgan Stanley in 2007, an investment which suffered losses in CIC holds significant stakes in domestic large-cap financial sector firms, such as a 59.12% stake in China Construction Bank and a 67.49% holding in Bank of China. CIC invests in China-based financial institutions via its wholly owned subsidiary Central Huijin Investment. CIC has a diverse portfolio of investments across a number of sectors including consumer, retail, technology, telecommunications and pharmaceuticals. In January 2010, it was reported that CIC was looking at increasing its direct investments in companies predominantly in emerging markets. In particular the sovereign wealth fund was looking at investing in Brazil and Mexico Preqin Ltd * = Fund Target 8

9 11. Profiles of Sovereign Wealth Funds - Sample Pages Real Estate Preferences Value Core Core-Plus Opp. Debt Dist. F o Fs Secondaries Added N. America Europe Asia MENA Other Emerging Managers CIC invests in real estate directly and through real estate funds. In April 2009, CIC committed USD 800 million to Morgan Stanley Real Estate Fund VII Global after announcing plans to move towards more fixed income and real estate investments one month earlier. This fund provides CIC with opportunistic and distressed global property exposure ranging from hospitality and industrial, to residential and retail properties in countries such as Germany, the US and India. The fund also targets real estate companies. In Q2 and Q3 2009, the sovereign wealth fund acquired stakes in two private equity real estate firms. CIC provided AUD 500 million of financing to Australian real estate firm Goodman, which saw the two organisations forming a broad strategic relationship. CIC also purchased a 40% stake in CITIC Capital Holdings, a Hong Kong-based private equity and real estate firm. It was suggested CIC paid around USD 260 million for this stake and the transaction would increase CITIC's assets from HKD 3 billion to HKD 5 billion. CITIC's existing shareholders, CITIC Pacific and CITIC International Finance, would each see their 50% stakes reduce to 30%. Through this deal, CIC gains exposure to the real estate market in China, although it does not constitute a commitment to invest in CITIC s funds. In September 2009, CIC was looking invest up to USD 2 billion in the US mortgage sector. The sovereign wealth fund believed there would be an improvement in the real estate market and therefore was interested in gaining favourable returns through this segment of the market. It was suggested that CIC might commit to funds targeting mortgagebacked securities as it believed it was a more appealing route than buying into the US Federal Reserve s Term Asset Backed Securities Loan Facility (TALF). CIC was in discussions with nine US Treasury-chosen Public-Private Investment Plan managers, including Invesco Real Estate, Oaktree Capital Management, BlackRock Realty and Marathon Asset Management. A decision was expected by the end of August, however not all nine managers would be selected. Part of its plan saw the sovereign wealth fund allocate USD 1 billion to Global Real Estate Investment Consortium. This global vehicle is involved in recapitalizing and repositioning properties and in the restructuring of debt and companies. CIC can opt out of certain deals if it chooses to do so. Infrastructure Preferences Greenfield Brownfield Secondary Stage Economic Social PPP/PFI F of Fs N. America Europe Asia MENA OECD Other Emerging Managers In September 2009, China Investment Corporation stated that it aimed to take minority equity stakes in global highyield infrastructure assets, including green and new energy projects. The fund is particularly interested om opportunities in India, Mongolia and Pakistan. In H2 2009, CIC was considering a maiden allocation to infrastructure, and in Q it agreed to invest USD 1.58 billion in Virginia-based AES Corp., which targets the power sector, including renewable energy and emerging markets. CIC acquired million shares of AES stock for USD 12.6 per share, representing approximately a 15% equity interest in the company. AES owns and operates a diverse portfolio of power generation and distribution businesses in 29 countries. More than two-thirds of the firm s revenue is generated outside of the US. According to the agreement, CIC will nominate one director to the AES board. Hedge Fund Preferences L/S Equity Macro Event Driven Distressed Securities Fixed Income Arbitrage F of Fs Other Any N. America Europe Asia MENA Other Global Emerging Managers No CIC announced plans to make its first investments in hedge funds in June It expressed a preference for Asianbased hedge fund managers with which it has a prior relationship, as well as managed accounts, direct hedge funds and funds of hedge funds, and intends to commit to a range of strategies including distressed debt and credit. It plans to invest in emerging markets as it has easy access and links to these regions. The sovereign wealth fund planned to allocate USD 6 billion to hedge fund investments by the end of In July 2009 it was reported that in addition to a USD 500 million mandate awarded to Blackstone Group for investment in hedge funds, the sovereign wealth fund also allocated Morgan Stanley a further pool of capital to invest in hedge funds on its behalf. CIC owns stakes in both the Blackstone Group and Morgan Stanley. In September 2009 CIC announced two new hedge fund investments: a USD 1 billion investment with Oaktree Capital Management, a Los Angeles-based hedge fund manager; and USD 200 million with Capula Investment Management, based in London. Bill Lu, former portfolio manager at Tudor Investment Corp. was hired as managing director of hedge funds and public market investments, replacing Felix Chee in November In Q it was reported that the sovereign wealth fund expected to allocate up to 60% of the USD billion capital it expected to receive in 2010 to investments in hedge funds and private equity funds outside of China. External Investment Managers & Other Firms Invested With Firm Name Glencore International Blackstone Alternative Asset Management Capula Investment Management Morgan Stanley Investment Management Oaktree Capital Management Goldman Sachs Group Invesco Aim Advisors Legg Mason Goldman Sachs Group JC Flowers & Co Lexington Partners Pantheon Ventures Investment Consultants Firm Name Credit Suisse Customized Fund Investment Group StepStone Group Asset Class Commodities/Natural Resources Hedge Funds Hedge Funds Hedge Funds Hedge Funds Money Markets Money Markets Money Markets Asset Class Notable Holdings Firm Name Public/Private Firm Location Stake AES Corporation Public US 15.0% Apax Partenrs Private UK 2.3% BlackRock Private US USD China Construction Bank Public China 59.0% 2010 Preqin Ltd * = Fund Target 9

10 11. Profiles of Sovereign Wealth Funds - Sample Pages China Development Bank Private China CITIC Capital Private Hong Kong 40.0% GCL-Poly Energy Holdings Public Hong Kong 20.0% Morgan Stanley Public US Nobel Oil Group Private Russia 45.0% Noble Group Limited Public Hong Kong 14.9% SouthGobi Energy Resources Public Canada 50.0 USD Teck Resources Public Canada 3,540.0 USD Sample Fund Investments - Alternatives Fund Vintage Asset Class Location Size (mn) Committed (mn) Triton Fund III 2009 PE: Buyout Europe 2,250 EUR Lexington Capital Partners VII 2009 PE: Secondaries US 5,000 USD * CIC-JC Flowers Financial Assets 2008 PE: Buyout US 4,000 USD Apax Europe VII 2007 PE: Buyout Europe 11,200 EUR 685 EUR Real Estate Turnaround Investment Program 2009 Real Estate US 5,500 USD * Morgan Stanley Real Estate Fund VII Global 2008 Real Estate ROW 6,000 USD * 800 USD Contact Name Position Telephone Hu Bing Head of +86 (0) Xiqing Gao Vice Chairman, President & CIO +86 (0) xqg@china-inv.cn Fan Gongsheng Manager, Overseas External Investments +86 (0) Gary Hua Managing Director +86 (0) huahua@china-inv.cn Zheng Kongdong Director of Public Market & Hedge Fund +86 (0) Investments Collin Lau Head of Real Estate +86 (0) Judy Li Senior Assistant +86 (0) liya@china-inv.cn Chuanbei Li Portfolio Manager +86 (0) licb@china-inv.cn Yang Qingwei Deputy CIO +86 (0) Lei Teng Associate +86 (0) leiteng@china-inv.cn Zhou Yuan Head of Alternative Investments +86 (0) Preqin Ltd * = Fund Target 10

11 2010 Preqin Sovereign Wealth Fund Review: Order Form The 2010 Preqin Sovereign Wealth Fund Review is the fi nance industry s leading source of information on sovereign wealth funds and their investment strategies, providing coverage on all different asset classes contained within their portfolios. Features include: The 2010 Preqin Sovereign Wealth Fund Review Profi les for all known sovereign wealth funds, with details on their investment activities generally, drilling down into asset class-specifi c preferences, information and future plans. Names of external investment managers and consultants, investments in notable fi rms, and sample alternatives fund investments are included. Also covered is key fi nancial information, such as total assets and allocations, and full contact details for fund and staff. Informative analysis on the world of sovereign wealth funds, including a detailed overview and specifi c sections providing statistics, trends and outlook for public equities, fi xed income, private equity, real estate, infrastructure and hedge funds. Information on funds in the process of being established, countries considering the establishment of a fund and countries that have considered a fund, but have since shelved their plans Preqin Sovereign Wealth Fund Review Order Form - Please complete and return via fax, or post I would like to purchase the Preqin Sovereign Wealth Fund Review: Shipping $595 + $40 Shipping Shipping Additional Copies Shipping $90 + $20 Shipping Shipping (Shipping costs will not exceed a maximum of 15 / $60 / 37 per order when all shipped to same address. If shipped to multiple addresses then full postage rates apply for additional copies) I would like to purchase the 2010 Preqin Sovereign Wealth Fund Review Graphs & Charts Data Pack in MS Excel Format: (contains all underlying data for charts and graphs contained in the publication. Only available alongside $300 / 175 / 185 purchase of the publication). Name: Firm: Job Title: Address: City: Post / Zip Code: Country: Telephone: Purchase online: Payment Options: Cheque enclosed (please make cheque payable to Preqin ) *Security Code: Credit Card Visa Mastercard Amex Please invoice me Visa / Mastercard: the last 3 digits printed on the back of the card. Card Number: Expiration Date: Name on Card: Security Code*: American Express: the 4 digit code is printed on the front of the card. Equitable House, 47 King William Street, London, EC4R 9AF 230 Park Avenue, 10th fl oor, New York, NY Samsung Hub, 3 Church Street, Level 8, Singapore , w: / e: info@preqin.com / t: +44 (0) or / f: +44 (0) or