CIC’s Canadian resource investments have disappointed.
China Investment Corp. has no plans to close its Toronto office, people close to the fund said, despite reports the giant investment fund is considering moving its North American headquarters to New York.
The $580-billion (U.S.) sovereign wealth fund opened the office in the city in 2011, its first on the continent. At the time, the decision was touted as a coup for the financial community; Manulife Financial Corp. chief executive officer Don Guloien called it "a great tribute to the investment possibilities that CIC sees in Canada."
The Wall Street Journal reported this week that the fund is actively exploring the idea of running its North American operations out of New York. The CIC's new boss, Ding Xuedong, was said to be "open to the idea," particularly as the fund looks to shift away from resources and put more money in other sectors.
The division has delivered disappointing returns of late, in part because of its heavy positions in Canadian resource companies, including Penn West Petroleum Ltd. and Teck Resources Ltd., the shares of which have fallen 17 per cent and 32 per cent this year, respectively. But there may be a personal aspect to the decision to consider New York: The Toronto office was originally set up to accommodate the wishes of Canadian adviser Felix Chee, whose contract with the fund is set to expire at year-end.
Mr. Chee declined to comment on the reports.
One source said Mr. Chee is seeking to reduce his workload and is in discussions about continuing as a part-time adviser.
The fund has reviewed for some time a potential expansion into the United States to diversify its investments away from resource companies that are currently in a cyclical slump. Instead, sources said CIC is casting for long-term investments in infrastructure projects that generate more consistent annual investment returns.
U.S. equity markets have outperformed Canadian markets by a wide margin this year, with the Standard & Poor's 500-stock index up nearly 27 per cent, versus a 7.2-per-cent gain for the S&P/TSX composite index. This will be the third straight year in which U.S. equities brought greater returns.
A key reason for that is the deep slump in the mining sector, which has been hit hard by a combination of higher costs to build mines, lower commodity prices, and losses on bad acquisitions.
The S&P/TSX materials index, which is dominated by Canadian-based mining firms, is now below 2,000, or roughly half the level it was at when CIC opened the Canadian office, which houses a small team of investment professionals.