SWF Radar GaoXiqing

Bloomberg reports that, “China’s state-controlled fund [China Investment Corp.] may buy as much as 49 percent of [Morgan Stanley], said [a person familiar with the matter], who declined to be identified because the talks aren’t public and may end in no agreement.”

The article adds that, “CIC’s president, Gao Xiqing, is in the U.S. with Wei Christianson, who runs Morgan Stanley’s business in China, the Financial Times reported today.”

Here’s the Financial Times article.

Esquire has published a profile of Gao Xiqing, general manager of the China Investment Corporation (CIC).

Portfolio.com writes that, “Blackstone gave it a black eye and its Morgan stake is a mess. Still, the head of China's sovereign wealth fund says he's sticking with his big bet on financials.”

Note that the article is accompanied by a great picture of Lou Jiwei and Gao Xiqing, board chairman and general manager respectively of China Investment Corporation. It’s definitely worth a click.

The Chronicle, which describes itself as “The Independent Daily at Duke University,” rails against Duke’s recent naming of Gao Xiqing, the general manager of the China Investment Corporation (CIC), to its board of trustees. It writes that:

Although we [the authors of the piece] have great admiration for the Chinese people, their culture and their achievements, all enhanced by the stunning success of the Beijing Olympics, their tyrannical government merits our condemnation. And Gao is a creature of that government, born of it, beholden to it and now begetting of it. His elevation to the Duke Board is highly inappropriate.

How can the same Duke Trustees who established a policy to bar investment in Darfur because of genocide, who divested from South Africa because of apartheid, who stood for free speech at the Palestinian conference, now accept in their midst a leader of the repressive Chinese regime that overruns all these values. Indeed a leader whose financial acumen will nourish the regime!

The Triangle Business Journal reports that, “Duke University has named the head of China’s sovereign wealth fund to its board of trustees. The university said in a statement that Xi-Qing Gao has joined the board for a five-year term.”

Thomson Reuters reports that, “China Investment Corp is turning its back on countries that are suspicious of sovereign wealth funds, Gao Xiqing, CIC’s president and chief investment officer, said on Friday. Gao told a mergers and acquisitions conference that CIC ‘has a problem’ that countries are defining more industries as strategically important.”

The article also quotes Gao as saying that, “We are looking at clean energy and environmentally friendly investment. (We are) looking at everything cross-border except for casinos, tobacco companies or machine gun companies.” This interest in socially responsible investing (SRI) suggests that CIC is indeed following the Norwegian SWF model, as Gao said it would during his 60 Minutes interview.

It should be noted, though, that the use of investment screens based on non-financial criteria and the targeting of areas favored for non-financial reasons are likely to open up CIC to further charges of political influence (as, for example, with the political battles in the US in the 1990s over economically targeted investments by pension funds).

Its adopting SRI could see CIC coming under pressure from Western activists as a possible ally in various social and environmental causes.

And it could also see CIC’s returns weighed down by various opportunity costs or even losses from socially and/or environmentally responsible but ultimately bad investments (note, for example, CalSTRS recent reconsideration of its expensive decision in 2000 to divest in the tobacco industry and recent warnings that clean-energy investing may be showing signs of bubbling over).

Thomson Reuters reports that, “The world’s largest hedge funds and the Chicago Mercantile Exchange (CME) need to convince a ‘cautious’ China of the benefits of their products, the groups said on a trip to the country, even as U.S. regulators look to rein them in. … ‘There is a cautious desire to understand what we do,’ said [Richard Baker, the former U.S. congressman and now chief of Managed Funds Association, a hedge fund industry lobbying group], referring to a conversation he had with Chinese officials including Gao Xiqing, the general manager of China Investment Corp (CIC), a sovereign wealth fund set up last year to manage $200 billion in reserves.”

The head of ADIA, arguably the world’s biggest SWF, recently mentioned in an interview that he will be shifting assets from hedge funds to index funds following what he sees as underperformance by the former.

The Financial Times writes that, “The head of China's $200bn sovereign wealth fund said on Tuesday the fund was trying hard to adapt to international demands for greater transparency even though this was contrary to the country's ancient historical traditions.”

The article quotes Gao Xiqing, president and chief investment officer of China Investment Corporation, as saying that, “Our government has never been transparent for 5,000 years. Now we are told we need to be transparent and we are trying.”

AFP reports that, “Massively rich sovereign wealth funds from China and Norway, feared by some for their power, said on Tuesday [at an OECD forum in Paris] they posed no threat and wanted to be treated in the same way as ordinary investors.”

Thomson Financial reports that, “The Chinese sovereign wealth fund China Investment Corporation is just looking to be a passive investor in companies that it takes a stake in and is not looking to take control of any foreign industries, president and chief investment officer Gao Xiqing said [at an OECD forum in Paris on Tuesday].”