[BEIJING] China’s sovereign wealth fund has pulled its planned sale of US$1 billion in US fund stakes tied to some of the biggest names in private equity.
Earlier this year, China Investment Corporation (CIC) looked to offload fund positions with firms including Carlyle Group, KKR, and TPG to reduce its US exposure. Months later, it has signalled to would-be buyers and managers that it’s no longer selling the stakes, according to sources familiar with the deal who asked not to be identified discussing private matters.
A representative for CIC did not respond to a request for comment. Evercore, the investment bank tapped for the sale, also did not respond.
It’s rare for institutions to pivot after advancing this far in a sale process. The proposed deal had highlighted the US$1.3 trillion state fund’s reduced appetite for risk-taking, and its concerns about having so much money tied up in less liquid US assets amid the US-China trade impasse.
At the same time, CIC was sensitive to being perceived as being in retreat, according to sources familiar with the matter.
In recent weeks, US and Chinese officials have hammered out a framework to de-escalate tensions, reducing pressure on CIC to divest. The US has signalled it’s willing to remove restrictions on some tech exports in exchange for assurances China is easing limits on rare earth shipments.
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A trade war with the US – and the threat that President Donald Trump’s administration could levy capital restrictions on adversary nations – creates new risks for funds such as CIC, which manages a chunk of China’s foreign reserves. The Chinese money manager is selling other US private assets, which may include real estate and infrastructure holdings, Bloomberg News reported earlier.
In the face of tighter scrutiny from Washington, the state investor has become a quieter presence on dealmaking circuits compared with its heyday. In the 2000s, CIC made big bets on Blackstone and Morgan Stanley, and was a symbol of China’s ambitions to parlay its vast foreign reserves into power and clout.
Its allocation to alternative assets has slipped below its 50 per cent target, according to its latest annual report for 2023. In recent weeks, it’s tried to persuade outside firms that it remains a committed partner, another source familiar said.
CIC would have sold into a market eager to absorb private equity fund stakes with marquee managers. Intense competition among secondary buyers has led to lower discounts for institutions looking to offload positions. The value of secondary deals surged to a record US$160 billion last year, according to Evercore, as more investors seek to cash out investments early and buyers are attracted by discounts. BLOOMBERG
