China auditor says CIC mismanagement led to investment losses

Bloomberg

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View of the New Poly Plaza where the headquarters of China Investment Corporation (CIC) is located in Beijing, China. View of the New Poly Plaza where the headquarters of China Investment Corporation (CIC) is located in Beijing, China.
Mismanagement at China Investment Corp., the nation’s $575 billion sovereign wealth fund, led to overseas investment losses that could widen, according to the National Audit Office.
A dereliction of duty, inadequate due diligence and post-investment management were identified in 12 investments made abroad by the fund between 2008 and 2013, according to results of an audit conducted last year. Six of the deals were unprofitable, four of them had unrealized losses, and two may potentially lose money, according to the report released today on the auditor’s website, which didn’t name the investments or disclose their size.
CIC, set up in 2007, reported a 10.6 percent return on its overseas portfolio in 2012 as global equities rallied, reversing a 4.3 percent loss in 2011, according to company statements. Returns exceeded 8 percent last year, Vice President Liang Xiang said in March.
Auditors also found irregularities at Beijing-based CIC’s domestic units. Among them, Central Huijin Investment Ltd. lost 1.26 billion yuan ($202 million) in potential investment gains in 2011 by selling a stake in a local securities company at the cost price and not conducting an asset appraisal as required, according to the report.
CIC’s Beijing-based press office didn’t immediately respond to an e-mail seeking comment.

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