China Investment Corporation’s assets under management grew by 23% to $410 billion in 2010, and its profits by 24% to $52 billion, according to the sovereign wealth fund's 2010 annual report, released yesterday.

The $135 billion international (ex-China) portfolio returned 11.7%, the same as in 2009, after CIC reduced its cash holdings, increased direct investments and further diversified the portfolio. The international portfolio has grown particularly swiftly from an initial $21 billion in AUM in 2008, with the help of capital injections from the government.

Last year, in the international portfolio, CIC cut cash holdings to 4% from 32% in 2009, boosted equity and alternative investments to 48% (from 36%) and 21% (from 6%), while fixed-income remains almost flat at 27% (it was 26% in 2009).

The SWF added a large number of asset classes and instruments to the international portfolio in 2010, including credit and interest-rate products, US large-cap equities, emerging-market equities, commodity index products, and futures and options. The number of investment portfolios doubled compared to 2009.

CIC has also increased its allocation to alternative investments, such as private equity, real estate (Reits in particular), infrastructure and direct investment. Most of its direct-investment projects highlighted in the annual report are in the resources and utilities industries. 

Geographically, the SWF remains heavily focused on North America (41.9%), with the remainder invested in Asia Pacific (29.8%), Europe (21.7%), Latin America (5.4%) and Africa (2.1%). These figures remain almost flat from the previous year, the exception being that the Africa allocation has more than doubled from 0.9%.

The fund says it has increased its allocation to emerging markets by investing in local-currency bonds and Asian sovereign debt, and making changes to its Asia ex-Japan and Europe equity portfolios and its energy and mining stock holdings.

In terms of the industry breakdown of CIC’s equity portfolio, the top three sectors are financial (17%), energy (13%) and materials (12%). 

At the end of 2010, third-party mandates accounted for 59% of CIC’s international portfolio, the same proportion as last year. However, the fund says it is continuously improving its internal investment capability and has added new proprietary portfolios, such as US government debt, euro-denominated bonds, a Xinhua-FTSE enhanced portfolio and a global large-cap value equity portfolio. 

But this does not necessarily mean the size and number of investment mandates issued will decrease, as CIC is reportedly applying for a new fund injection of up to $200 million this year.

As Shanghai-based consultancy Z-Ben Advisors notes: “The sheer size of new assets that CIC will be required to manage if it receives another injection will require a considerable degree of outsourcing for the foreseeable future, opening up a host of opportunities for asset managers.”

CIC earlier this month appointed Li Keping, former vice-chairman of the National Council for Social Security Fund, as its new chief investment officer, replacing Gao Xiqing.