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China's wealth fund feels pressure to make money
Wed Nov 14, 2007 5:45am EST
BEIJING, Nov 14 (Reuters) - China Investment Corp, the country's new sovereign wealth fund, will feel the heat at home if it loses a lot of money on its investments, a senior official at the firm said on Wednesday.
Zhao Haiying, head of CIC's asset allocation and strategic research department, said China's foreign exchange reserves had grown so big they were now an international political headache.
The stockpile, the world's largest, had ballooned to $1.43 trillion at the end of September, an increase of $367.3 billion in the first nine months.
"Two years ago nobody was really that worried about China's reserves of foreign currency. Now, suddenly, we are not only worried, it's become one of our headaches and we have to deal with it," she told a forum at Tsinghua University in Beijing.
CIC has been given an initial $200 billion chunk of the reserves to manage. Its first investment, a nearly 10 percent stake in Blackstone Group (BX.N: Quote, Profile, Research) that cost $3 billion, has lost 25 percent of its value since the U.S. private equity giant's IPO in June.
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woooooops! so what is the safe thing to buy if you are managing the funds when the boss will throw you in prison or kill you if you are found stealing? ain't like managing a hedge fund in conn. is it?
and...
Mortgage Woes Damage a GE Bond Fund
By ANDREW BARY
A SHORT-TERM INSTITUTIONAL BOND RUN MANAGED by General Electric Asset Management apparently has suffered losses in mortgage and asset-backed securities and is offering investors the option to redeem their holdings at 96 cents on the dollar.
The setback at GE Asset Management's GEAM Trust Enhanced Cash Trust is the latest in a series of problems encountered by money-market and short-term bond funds from the turmoil in the mortgage and asset-securities markets.
Legg Mason, Wachovia and Bank of America have had to provide financial support to their money-market funds to prevent their funds from "breaking the buck," or falling below the $1 asset value that money funds seek to preserve.
The GE fund, totaling $5 billion, is an "enhanced" cash fund, meaning it seeks to provide a slightly higher yield than a money-market fund while preserving principal and maintaining an asset value of $1 per share.
The fund has been willing to take more risk than a money-market fund by purchasing floating-rate mortgage and asset securities with high credit ratings. The bulk of the money in the fund comes from GE's pension trust and other GE employee benefit plans.
In a Nov. 8 e-mail to institutional holders of the fund, GE Asset Management cited "extreme conditions in the credit markets" and told investors that "it will soon begin to sell certain securities held in the Fund which will result in realized losses and likely bring the Fund's yield to zero."
In the e-mail, GE Asset Management said the fund has "sufficient liquidity to redeem all non-GE subscribers at the current net asset value (.96) but there can be no assurance that this will continue to be the case at any point in the future as the difficulties in this market persist." Outside institutional investors therefore face a 4% loss on their holdings. GE said it plans to soon redeem $250 million from the fund and may liquidate additional holdings in the future.
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checked those MM funds lately?
Wed Nov 14, 2007 5:45am EST
BEIJING, Nov 14 (Reuters) - China Investment Corp, the country's new sovereign wealth fund, will feel the heat at home if it loses a lot of money on its investments, a senior official at the firm said on Wednesday.
Zhao Haiying, head of CIC's asset allocation and strategic research department, said China's foreign exchange reserves had grown so big they were now an international political headache.
The stockpile, the world's largest, had ballooned to $1.43 trillion at the end of September, an increase of $367.3 billion in the first nine months.
"Two years ago nobody was really that worried about China's reserves of foreign currency. Now, suddenly, we are not only worried, it's become one of our headaches and we have to deal with it," she told a forum at Tsinghua University in Beijing.
CIC has been given an initial $200 billion chunk of the reserves to manage. Its first investment, a nearly 10 percent stake in Blackstone Group (BX.N: Quote, Profile, Research) that cost $3 billion, has lost 25 percent of its value since the U.S. private equity giant's IPO in June.
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woooooops! so what is the safe thing to buy if you are managing the funds when the boss will throw you in prison or kill you if you are found stealing? ain't like managing a hedge fund in conn. is it?
and...
Mortgage Woes Damage a GE Bond Fund
By ANDREW BARY
A SHORT-TERM INSTITUTIONAL BOND RUN MANAGED by General Electric Asset Management apparently has suffered losses in mortgage and asset-backed securities and is offering investors the option to redeem their holdings at 96 cents on the dollar.
The setback at GE Asset Management's GEAM Trust Enhanced Cash Trust is the latest in a series of problems encountered by money-market and short-term bond funds from the turmoil in the mortgage and asset-securities markets.
Legg Mason, Wachovia and Bank of America have had to provide financial support to their money-market funds to prevent their funds from "breaking the buck," or falling below the $1 asset value that money funds seek to preserve.
The GE fund, totaling $5 billion, is an "enhanced" cash fund, meaning it seeks to provide a slightly higher yield than a money-market fund while preserving principal and maintaining an asset value of $1 per share.
The fund has been willing to take more risk than a money-market fund by purchasing floating-rate mortgage and asset securities with high credit ratings. The bulk of the money in the fund comes from GE's pension trust and other GE employee benefit plans.
In a Nov. 8 e-mail to institutional holders of the fund, GE Asset Management cited "extreme conditions in the credit markets" and told investors that "it will soon begin to sell certain securities held in the Fund which will result in realized losses and likely bring the Fund's yield to zero."
In the e-mail, GE Asset Management said the fund has "sufficient liquidity to redeem all non-GE subscribers at the current net asset value (.96) but there can be no assurance that this will continue to be the case at any point in the future as the difficulties in this market persist." Outside institutional investors therefore face a 4% loss on their holdings. GE said it plans to soon redeem $250 million from the fund and may liquidate additional holdings in the future.
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checked those MM funds lately?