UPDATE 1-China CIC cautiously optimistic about 2011 despite global woe

Tue Jul 26, 2011 4:26am EDT

* CIC posts 11.7 pct return for second year in 2010

* CIC made $33.5 bln in fresh investments, slashed cash holdings

* Boosts equity, alternative investments (Adds more details)

BEIJING/SHANGHAI, July 26 (Reuters) - China Investment Corp (CIC), the country's $300 billion sovereign wealth fund, said it was cautiously optimistic about its investment outlook this year, after posting a 11.7 percent return on offshore investments for the second year in 2010.

The robust performance, achieved last year as CIC boosted overseas investment by $35.7 billion while nearly depleting its cash holdings, could bolster its case to win additional government funding.

"The international investment environment is getting more complicated, and there's great uncertainties towards sustained global recovery and growth," CIC Chairman Lou Jiwei said in the fund's 2010 annual report on Tuesday, citing factors such as the eurozone crisis and surging commodities prices.

"We're prudently optimistic about 2011. The global economy will continue to recover, but future path will be not even."

CIC, which was set up in 2007 with a mandate to diversify part of China's foreign currency reserves into riskier overseas assets, has repeatedly called for fresh capital injection from the government as it stepped up investment immediately after the 2007-2008 financial crisis.

CIC made $35.7 billion in fresh offshore investment last year, after adding $58 billion in 2009. Its overseas portfolio, including cash, totalled $135.1 billion at the end of last year.

Reflecting stronger appetite for riskier assets, CIC raised its equity investment to 48 percent of its portfolio from 36 percent in 2009, while increasing the portion of alternative investments, which include real estate and commodities, to 21 percent from 6 percent.

In contrast, CIC slashed its cash holdings to 4 percent of the portfolio from 32 percent a year earlier, while the proportion of fixed income investment rose to 27 percent from 26 percent. (Reporting by Langi Chiang and Kevin Yao in Beijing, Samuel Shen in Shanghai; Editing by Kazunori Takada)

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