Brad Setser

Follow the Money

Cross border flows, with a bit of macroeconomics

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The CIC, the world’s best performing sovereign fund?

by Brad Setser
October 29, 2008

To date, the CIC hasn’t exactly distinguished itself with its investment acumen. Its investments in Blackstone and Morgan Stanley are underwater. Its Blackstone shares are down something like 75%.

Even its “safe” investments haven’t been safe: it put money in the Reserve Primary Fund — the money market fund that famously broke the buck.

But it almost certainly has outperformed other sovereign funds this year. Its winning strategy?

Cash. Lots of it. SWF Radar highlighted a Thomson Reuters report that indicated:

[the] “CIC has been very stable so far, because at a time when global stock markets are dropping dramatically, it has more than 90 percent of its assets in cash,” the official Shanghai Securities News cited Lou Jiwei, head of CIC, as saying.

Apparently the CIC didn’t put most of its money to work. Which, if nothing else, means it didn’t lose all that much.

On the other hand, it really isn’t necessary to create a sovereign fund just to invest in money market funds.

A final bit of pure speculation: I wonder though if the CIC might have had a fair amount in some of Morgan Stanley’s money market funds. That might have contributed to Morgan Stanley’s decision to come to the assistance of its money market funds. This though is pure speculation on my part.

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