China's Social Security Fund lays groundwork for global private equity

The $240 billion fund is lobbying its regulators to allow it to invest in global alternative investments, but timing is a mystery.

China’s National Council for Social Security Fund (NSSF), which manages the country’s $240 billion Social Security Fund, is preparing for the day when it will be allowed to invest in global alternative investments. 

Vice chairman Li Keping says the NSSF has been lobbying its two regulators -- the Ministry of Finance and the Ministry of Human Resources and Social Security -- for permission to tap global alternatives, notably private equity and domestic real estate.

Although there is no way to know when such permission may be granted, the NSSF is laying the groundwork by speaking with global private-equity fund managers and learning about opportunities across the spectrum of unlisted securities investing. Li says the unlisted space will be the primary focus, not hedge funds.  

This dialogue is meant to train the NSSF staff so that they can speak fluently about global alternatives with their regulators.

The NSSF has also determined which global PE managers it would be likely to approach for mandates, should it ever get the go-ahead.

The NSSF allocates 20.5% to domestic private equity, which has quickly become a huge part of its exposure. For now, it is limited to taking stakes in large state-owned enterprises. The NSSF would also like to expand its domestic PE activity into smaller government organisations or to the private sector, but must await regulatory approval.

See the September edition of AsianInvestor magazine for the full interview with Li Keping.

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