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China`s social security fund to expand overseas investment

2011-03-25 08:24:34Source:People′s Daily OnlineAuthor:

Adjustments will be made to the investment portfolio of China's social security fund, such as requiring a higher ratio of overseas investments, in the future, said an official with the National Council of the Social Security Fund of China.

The specific ratio of overseas investments in the portfolio basket for each year will be subject to the market situation and risk aversion, the official noted.

The Social Security Fund of China now holds assets of 856.8 billion yuan (about 132 billion U.S. dollars), which is about ten times as much as the ratio in 2000, when the fund was established. It plays a crucial role in providing financial support for China's aging society.

Under the existing policy framework set in 2006, a cap of 20 percent of the assets can be invested on the overseas market. Currently only 6 percent has gone to the overseas market, focusing on the share and bond markets.

A few Fund of Fund projects which are thought to have low risk and high yields have been selected to expand the overseas operation. The plan has been submitted to the government for approval, according to Dai Xianglong, president of the National Council for Social Security Fund. He also disclosed that the investment in private equity funds and direct equity investment in non-listed companies could be a part of overseas investments in the future.

Private equity investment was prioritized in the portfolio of the Social Security Fund in 2009 after the Fund reported loss in its stock market investments for the first time in 2008. As of the end of 2010, the fund had made 12.7 billion yuan in commitments and 7.8 billion yuan of actual investments on the private equity market.

The overall annual return on investments of the Social Security Fund has reached 15.73 percent on average since it was established in 2000, which is 7 percentage pointes above the annual average inflation in the same period of time.