CIC's Disappointing Year

As reported by Xinhua, yesterday CIC announced a disappointing decline of 4.3% in the value of its portfolio “due to the slow recovery of global economy and the European debt crisis.”  This brings its 5-year annualized return to 3.9%.  This was not exactly “new” news, as CIC had already disclosed the disappointing results in its annual report (although the cumulative annualized number is different by 0.1):

 

 

 

 

 

 

 

 

 

 

 

What do these results mean for the Chinese government?  Managing public expectations of sovereign wealth fund performance is a concern from Alaska to Oslo to Beijing, and although the expectations may differ slightly, I think all would agree that “headline risk” is a major issue for SWFs.  Many Alaskans, no doubt, were disappointed by the relatively small $878 payout from the Alaska Permanent Fund this year.  One of the less discussed issues involving SWFs (an issue I’m writing on now) is how the funds can serve as an expression of cultural values or as a reflection of the society in general-think of a SWF like a national soccer team, or, since I’m in Columbus (Go Bucks!), like a college football team.  The downside to this is that poor performance may be taken quite badly by the public (but hopefully not this badly).  I believe that having a sophisticated public relations team is part of good governance practice for SWFs.

 

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