But earlier this month, CIC plowed an additional $1.2 billion into Morgan Stanley.

From Alphaville:

"China SWF eyes Blackstone fund Posted by Gwen Robinson on Jun 19 05:09.

China Investment Corp, the country’s biggest sovereign wealth fund, is poised to invest $500m in a Blackstone Group hedge-fund unit, reports the WSJ. A hefty injection from China would signal that some big money is stepping off the sidelines as global markets stabilise. CIC is considering investing in a number of hedge funds, as CIC chairman Lou Jiwei is concerned his fund may miss opportunities near the bottom of the market, said people close to the fund.

This entry was posted by Gwen Robinson on Friday, June 19th, 2009 at 5:09 and is filed under Capital markets, Private equity. Tagged with blackstone, CIC."

Me:

Don the libertarian Democrat Jun 19 23:18

I'm surprised by this. It makes sense, but weren't they just complaining that they're angry because, other than US Treasuries, the US wasn't implicitly guaranteeing their assets? Especially corporate bonds and stocks? Also, they were complaining about lack of transparency. What's changed?

One blog put forth the following view:

http://seekingalpha.com/instablog/399221-graham-and-dodd-investor/9075-china-is-not-betting-on-anything

"China really is buying into Blackstone. Its principals read like a veritable Who's Who of former U.S. government officials. So China wants ties with the U.S. Establishment. That's the real meaning of their investment in Blackstone. The hedge fund exposure is basically besides the point, as far as China is concerned"

This makes it sound like China is paying for lobbyists. Given how much business the govt is handing over to Blackstone, the idea that they're paying for investors with ties to govt makes sense to me. But could China's talking with John Paulson and the other managers mentioned also be explained that way?

Rather, why doesn't it make sense for China to invest in hedge funds with a proven record of buying distressed assets and making money on them? And, going back to the influence point, does China believe that will help them get their assets guaranteed?

It seems like an interesting story to me, but it doesn't seem to be generating a lot of interest generally.

From the WSJ:
By JENNY STRASBURG in New York and RICK CAREW in Hong Kong

China Investment Corp. is poised to invest $500 million in a Blackstone Group hedge-fund unit as part of a broad effort to put cash to work while global markets are rallying but remain below earlier peaks.

A hefty injection from China would be welcome news for hedge funds, eager to raise fresh capital after brutal markets and an exodus of investors hurt the industry. It also would offer another sign that some big money is stepping off the sidelines as markets stabilize world-wide.

Companies and investors are watching to see if sovereign-wealth funds will once again channel significant money into new deals, after several were burned by high-profile U.S. investments during the financial crisis. Though Middle East funds have ratcheted up spending lately, some remain hobbled by woes at home.

CIC is considering opening its checkbook to a handful of hedge funds, a move that comes as CIC Chairman Lou Jiwei is concerned his fund may miss opportunities near the bottom of the market, according to people who work closely with the Chinese fund. That is a reversal in attitude from December, when Mr. Lou said he didn't have "the courage" to invest in the developed world's financial institutions because "we don't know what trouble they are in."

A spokeswoman for CIC and a spokesman for Blackstone declined to comment.

Set up in 2007 and capitalized by Beijing, CIC is one of the world's largest sovereign-wealth funds, controlling some $200 billion. The fund already knows Blackstone well, and has suffered some from the relationship. CIC invested $3 billion for a nearly 10% stake in Blackstone just before it went public in 2007, an investment that brought it ridicule in China when the private-equity firm's shares fell. Since Blackstone's IPO two years ago this coming Monday, Blackstone shares have dropped about 64%, leaving CIC with a loss of about $1.9 billion.

Still, CIC managers later struck a deal with Blackstone allowing the fund to increase its stake to 12.5%, signaling confidence in the firm's prospects. And committing capital to Blackstone's hedge-fund unit is a bet more on its expertise than its stock.

That Blackstone division has about $26 billion in investments doled out to hedge funds on behalf of Blackstone clients. One of the world's largest so-called fund-of-fund managers, Blackstone commands access to some of the biggest funds.

It isn't clear how much CIC might allocate to hedge funds. In the past, CIC officials have said they plan to farm out up to $80 billion to asset managers, with private-equity firms and hedge funds likely to get a chunk of that capital.

Prominent hedge funds have been talking to CIC for months. Eric Mindich of Eton Park Capital Management and John Paulson of Paulson & Co. are among hedge-fund bosses who have met with CIC representatives, among other Asian investors, in recent months, according to people familiar with the matter. Wall Street insiders see those hedge funds as on a relatively short list of managers more likely than peers to get CIC money, though such decisions could take months.

Investment staffers at the Chinese fund also have sought the hedge-fund managers' view of the credit crisis and global markets in general.

Last year, James Simons, head of big hedge-fund firm Renaissance Technologies, talked with CIC about selling a stake in Renaissance but didn't do a deal, people familiar with the matter said.

Spokesmen for the hedge funds declined to comment.

The China fund's plans don't necessarily mark a trend toward more global investments by sovereign-wealth funds. Temasek Holdings Pte. Ltd., Singapore's state-owned investment firm, this year has moved to focus more on Asia investments, selling off stakes in foreign banks at big losses.

In the Middle East, there has been continued deal activity. In March, Abu Dhabi investors snapped up a 9.1% stake in Daimler AG. And earlier this month, the government-backed investment company of Qatar said it is considering a deal to invest in Porsche Automobil Holding SE. The buying comes as the region's fortunes have started to turn around, thanks in large measure to climbing oil prices.

But some big Mideast players remain reined in. Kuwait, hobbled by political infighting and a banking crisis, withdrew from a planned joint venture with Dow Chemical Co. late last year, blaming the global financial crisis. And Dubai, another U.A.E. emirate, is still reeling from its property-market bust and lately has refrained from big international deal-making.

CIC has been ramping up activity. CIC in late 2007 put $5.6 billion in Morgan Stanley convertible securities whose value later plunged. But earlier this month, CIC plowed an additional $1.2 billion into Morgan Stanley. On Tuesday, CIC struck its first known property deal, agreeing to commit 200 million Australian dollars (US$158.9 million) to a financing facility for Goodman Group, Australia's largest industrial-property trust.

Elsewhere, CIC put $3.2 billion toward a $4 billion fund managed by J.C. Flowers & Co. to hunt for opportunities among financial institutions.

—Chip Cummins in Dubai contributed to this article."

We should welcome such deals as rare signs of health amid collapsed trade and retrenching finance.

TO BE NOTED: From the FT:

"From vultures to white knights

Published: April 20 2009 20:00 | Last updated: April 20 2009 20:00

Lou Jiwei, the head of China Investment Corp, cannot contain his glee. A year ago, sovereign wealth funds were portrayed in the US, Europe and Japan as vultures bent on gaining political influence through their investments. These days, in a welcome change of attitude, governments and companies cannot throw their doors wide open enough.

The scaremongering was fuelled by a mix of xenophobia and legitimate security concerns, illustrated by US opposition to Dubai Ports World’s attempt to acquire six US ports in 2006. To pre-empt such opposition, SWFs last year agreed on the “Santiago Principles”, a code of conduct promising transparent and non-political investments.

Perhaps they need not have bothered. Mr Lou says Europeans now “come to me without conditions”. Japan is relaxing tax rules that previously discouraged Middle Eastern funds from investing in the country.

In fact recipient countries have little choice. After financial markets’ rush to liquidity and safety, SWFs are among the few remaining sources of capital with patience and tolerance for risk. Governments, making a virtue of necessity, can no longer indulge their earlier hysteria. This is good for everyone.

The political worries were always overdone. Many SWFs are portfolio investors of no political consequence. Large strategic equity stakes, however, could give political influence, and may legitimately be limited in sectors crucial to national security. But the politics cuts both ways. France is reportedly considering giving Middle Eastern funds a stake in Areva, its nuclear champion, to reinforce its political influence and improve the company’s prospects in the region.

SWFs also face political constraints at home. Chinese and Norwegian funds have lost record amounts from badly timed shifts into equities and bad bets on US banks. Norway’s government will review its fund’s investment strategy. In less-transparent China, the funds have become even more tight-lipped to fend off criticism.

This illustrates an often-forgotten point. Most SWFs cannot allow themselves to lose large amounts of money on nebulous political strategies. Like large private investors, their purpose is above all commercial. This is obvious for portfolio investments. Strategic investments, too, can serve economic diversification. Abu Dhabi’s decision last month to buy 9.1 per cent of Daimler through Aabar Investments is an attempt to transfer manufacturing skills to the emirate.

We should welcome such deals as rare signs of health amid collapsed trade and retrenching finance.

Copyright The Financial Times Limited 2009"

“We couldn’t accept that because investments should be based on market practices,”

TO BE NOTED: From Bloomberg:

"China’s Wealth Fund to Consider Investing in Europe (Update2)

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By Eugene Tang

April 18 (Bloomberg) -- China’s $200 billion sovereign fund will consider investing in Europe in 2009, after avoiding the continent last year because of trade barriers, said China Investment Corp.’s Chairman Lou Jiwei.

“Europe has started to welcome investments” without attaching conditions, Lou said today at the Boao Forum in southern China’s Hainan province. “During the world financial crisis, sovereign wealth funds have become more appealing” and less frightening, he said. Beijing-based CIC, whose investments have included stakes in Blackstone Group LP and Morgan Stanley, didn’t invest “a single cent” in European companies or assets last year, because the continent had put up barriers to limit the activities of sovereign wealth funds, he said.

The agency was founded to provide better returns for China’s foreign-currency reserves, the world’s largest at $1.95 trillion. The fund last year earned $10 billion from its investments, representing a 5 percent return, Radio Television Hong Kong reported on Feb. 24, citing a source it didn’t identify.

“There was rising protectionism against China last year, and the European Union had the worst” limits, Lou said today. “They allowed us to invest in no more than 10 percent of a company’s stakes and required us to give up our voting power” in management, he said.

“We couldn’t accept that because investments should be based on market practices,” he said. “With the removal of these conditions, we will seriously consider making decisive and prudent investments overseas this year, including in Europe.”

He declined to specify the European industries or companies he’s looking at investing in."