CIC’s total portfolio allocation framework has evolved over time in line with our characteristics as an institutional investor and our investment philosophy. It draws upon academic and industry research, as well as the experiences and best practices of leading international investment institutions, and stipulates clearly defined roles and responsibilities.

The Reference Portfolio-Policy Portfolio-Actual Portfolio Framework: the company has adopted a portfolio construction framework that consists of a reference portfolio, policy portfolio, and the actual portfolio. Under this framework, total portfolio returns are determined by reference portfolio selection, policy portfolio construction, and actual portfolio management.

Overall, CIC adopts a sound asset allocation framework to build a balanced, robust investment portfolio spanning the asset classes of public equity, fixed income, alternative assets, cash products, etc.

In 2021, global growth staged a recovery, with a staggering rally in global equity markets. This strong bounce back was, however, accompanied by rapidly rising inflation, elevated asset valuations, fast-moving style rotation, and divergent performance across regions and sectors. Elevated geopolitical risks and global supply chain disruptions made for a complex and volatile international investment arena.

Undaunted by these severe external challenges, CIC remained consistent in its strategic focus and pushed forward with its drive for innovation. Guided by our five-year strategic plan and consistent with our “One CIC” philosophy, we further optimized our overseas investment framework and division of responsibilities, with differentiated approaches for public and private market investments. This enabled us to move steadily ahead with our investment activities. Specifically, the company (a) introduced improvements to asset allocation and portfolio construction, while bolstering dynamic allocation management to enhance the quality and resilience of the total portfolio; (b) improved its management of public market investments with enhanced institutional investment capabilities; (c) made headway in private markets leveraging our global network of partners; and (d) developed new modalities for outbound investments and further enhanced post-investment management.

TIn 2021, CIC successfully achieved all main business targets set for the year. The overseas investment portfolio posted a double-digit return, and the annualized cumulative 10-year net return rose to a new all-time high.

Public Market Investments: Enhancing Institutional Investment Capabilities with Improved Management Precision

Against the backdrop of evolving dynamics in global equity and bond markets, CIC continued to strengthen its ability to identify market trends and mitigate investment risks, while taking a more granular approach to managing its public market investments. The company further enhanced its top-down management of public equity and debt investments, which enabled us to optimize our public market footprint. To enhance the performance of externally managed investments, CIC continued to build up its roster of external managers and made further improvements to its external manager evaluation system. In parallel, the company continued to build stronger capabilities for proprietary investments in public markets, leveraging research to capture additional sources of alpha and to achieve more granular portfolio management and stronger resilience. CIC also continued to build up its passive investment capabilities, further developing its in-house capacities for sectoral, geographical, and custom index investing. In its public equity and debt investments, the company continued to practice systematic planning and to maintain a carefully designed footprint through holistic, top-down management, supported by fine-tuned operational mechanisms.

Public equities: CIC strengthened its top-down analytical framework to account for dominant macro factors in the market this year, and made proactive portfolio adjustments to optimize its investment footprint and strategy. Return predictability was improved with enhanced analytical tools, more granular strategy composition, close monitoring of portfolio characteristics, and uniform management of style preferences. The company also stepped up its research into relevant investment themes to capitalize on future investment trends, and dedicated more resources to developing a sustainable investment framework and implementation approach that suits CIC’s institutional profile.

Fixed income and absolute return: The fixed income portfolio is an integral part of the total portfolio rebalancing and liquidity toolkit, ensuring the total portfolio’s liquidity by expanding external funding channels. CIC strengthened its macro-policy research and further enhanced its proprietary and mandated global fixed-income investments. We closely monitored developments in the hedge fund industry, appointing new managers and making portfolio adjustments as appropriate. The company took stock of the characteristics, investment objectives, and portfolio construction of its multi-asset risk allocation strategy, optimized the portfolio based on our market views, and moved steadily ahead with its proprietary macro factor investments.

Private Market Investments: Steady Advances in Quality and Scale

In 2021, CIC continued to increase its capital allocation to alternative investments, further expanding its private market footprint. Thanks to ongoing improvements to investment structure, the company’s private market investments made strong progress in terms of scale, quality, and coherence. New private market commitments continued to grow by double digits. As a result, the company achieved new all-time highs in both the number and value of its private investments. CIC continued to strengthen its partnerships with industry-leading general partners (GPs), expanding its network of GPs and advancing selection of new strategy funds. The company established sustainable investing as a key investment theme and explored an energy transition strategy to exploit relevant opportunities. We continued to build a more robust institutional set-up for private market investments, to better support the rapid growth of our private market investment business.

Private equity and private credit: CIC continued to optimize its fund portfolio, leveraging in-depth analysis of structural changes underway in private markets and their likely evolution in the post-pandemic era. The company strengthened its partnerships with existing GPs and added new top-tier GPs to its pool. We expanded our strategic partnership network, added leading GPs, and re-upped with existing GPs. The company actively invested in continuation funds in the secondary market, and took innovative steps to build long-term positions in quality assets. We continue to build partnerships and expand co-investments in sectors of focus including TMT (technology, media, and telecom), healthcare, consumer services, high-end manufacturing, fintech, and financial services. In parallel, we are seeking new investment opportunities in themes such as climate change, new energy, and software. CIC helps GP portfolio companies to connect to China’s market and Chinese businesses, so as to create value and share the accruing benefits with our partners.

Real estate:Real estate continued to serve as a defensive asset class and shield against inflation. CIC continued to build up its portfolio of core real estate assets in line with our analysis of industry trends and asset cycles. Heeding the long-term post-pandemic outlook, we focused on real estate opportunities around technology innovations, demographic trends, and ESG. In terms of investment strategy, CIC, together with our partners, sought to exploit opportunities arising out of pandemic-induced volatility while tilting toward defensive sectors that align with long-term trends, show pan-cyclical resilience, and can cushion against volatility.

Infrastructure:CIC’s post-investment management and new investments alike were highly effective due to our strong insight into market dynamics. In particular, our close monitoring of key investments allowed us to maintain strong performance despite the lingering effects of the pandemic and rising inflationary pressures. In-depth sectoral research enabled us to fine-tune our investment strategy and rebalance our allocations across sectors and regions to diversify risk. In particular, we scaled up our exposure to the Asia Pacific region, as well as to the digital infrastructure, power, renewable energy, and public utilities sectors.

Energy and resources:CIC’s commodities portfolio posted strong results in 2021, supported by a cyclical uptrend in the sector. The company closely monitored the health of its assets, enhanced post-investment management, and guarded against risks. We also sought opportunities arising from energy transition, increased exposure to renewables, and recruited high-caliber managers with relevant industry expertise.

Agriculture:Taking a research-driven approach, we stepped up our agriculture investments and further consolidated our footprint across the agricultural value chain. We seek to build an investment ecosystem by establishing long-term relationships with major investors in this sector. Together with leading international and domestic partners, CIC is co-sponsoring multiple deals with a view to creating value. Our ability to bridge markets is central to the CIC brand and to our competitive advantage in this space.

Bilateral funds:By leveraging these cooperative mechanisms to deploy investments and capture opportunities for value creation, CIC connects portfolio companies with the China market and with Chinese industry partners, advancing international industry and investment cooperation.

Overseas Offices: Extending our Footprint across the Globe and Deepening our International Partnerships

CIC International (Hong Kong) prudently managed portfolio risks in its public market portfolios against market challenges. It also took advantage of its presence in Hong Kong to monitor closely market dynamics in the region and across the globe, and to engage in active exchanges and interactions with peer institutions. With a focus on the Guangdong-Hong Kong-Macau Greater Bay Area and growing reach to the Asia Pacific, CIC International (Hong Kong) explores private market investments and synergizes with headquarters departments in deal sourcing and post-investment management.

CIC New York Representative Office leveraged its local presence in the financial capital of the world to conduct research in a variety of areas including policy and regulatory developments, economic trends, and investment markets in the region. The office stayed in close liaison with our company’s broad business network in Americas, and sought to identify potential investment opportunities. The office also actively supported the investment teams at the headquarters, primarily in due diligence and post-investment management.

CIC is a long-term institutional investor with a 10-year investment horizon that applies annualized rolling returns as its key performance metric.

In 2021, CIC’s overseas portfolio posted a net annual return of 14.27%. As at December 31, 2021, CIC’s annualized cumulative 10-year net return stood at 8.73%, and its annualized cumulative net return since inception stood at 7.22%. All the above figures are calculated on a USD value basis.

Investment Performance on the Global Portfolio (all measured in US$)

Year Net cumulative annualized return Net annual return
2008a -2.1% -2.1%
2009 4.1% 11.7%
2014 5.66% 5.47%
2015 4.58% -2.96%
2016 4.76% 6.22%
2010 6.4% 11.7%
2011 3.8% -4.3%
2012 5.02% 10.60%
2013 5.70% 9.33%
2017 5.94% 17.59%
2018 5.18% -2.35%
2019 6.13% 17.41%
2020 6.71% 14.07%
2021 7.22% 14.27%

a. Net cumulative annualized returns and the annual return for 2008 are calculated since inception on 29 September 2007.

Investment Philosophies Risk Management