* Commodity trader, China sovereign wealth fund in pact
* Move would help CIC expand commodities investment capacity
* Deal follows senior meeting in late-Aug; details unclear
By Polly Yam and George Chen
HONG KONG, Sept 17 China's $200 billion
sovereign wealth fund has added privately-held commodities
trader Glencore International AG [GLEN.UL] to its roster of
approved investment partners as it deepens its access to global
raw material markets, two sources familiar with the matter said
A source familiar with China Investment Corp's strategy said
Glencore and CIC's fixed-income department recently concluded a
preliminary "commodities product investment agreement". The
source was not able to offer any additional details.
A manager at a trading and investment firm in Asia, which is
a client of Glencore, said top management from Glencore visited
CIC in Beijing in August and signed a memorandum of
understanding in which CIC agreed to invest in Glencore's
products or bonds.
A CIC spokesman declined to comment when contacted by
It was not immediately clear how CIC would work with
Glencore, the world's biggest commodities trader, which
typically trades its own book. But Glencore also has a
derivatives trading venture with Credit Suisse, which has an
expanding business offering commodity investment products to
CIC, founded in late 2007 and the youngest major player of
the world's sovereign fund families, has set up client-like
relationships with many banks and funds already, relying on
external asset managers for some investment areas where it is
not strong enough to play alone.
For example, CIC committed $800 million in a new $6 billion
global Morgan Stanley (MS.N) real estate fund late last year,
thereby allowing CIC to become an investor of the fund as well
as a client of Morgan Stanley in the real estate investment
CIC was also reported by Britain's Independent on Sunday
last month to be one of six companies interested in lending cash
to Glencore in return for a stake in the trading house.
Commodities is a relatively new investment area to CIC as
the sovereign fund set up its commodities team within its
fixed-income department only late last year.
The state fund so far has less than 10 investment
professionals specialising in commodities, so the sovereign fund
has to rely on external managers for investments in commodities
area, said a source familiar with CIC's investment strategy.
Glencore, founded in 1974, has been one of the top sellers
of primary aluminium, nickel, alumina and base metal
concentrates to the Chinese market for decades. [ID:nSIN449965]
Glencore International, the world's biggest commodity
trader, and Credit Suisse CSGN.VX were in advanced discussion
about creating the world's first physically backed aluminium
exchange traded fund (ETF), four industry sources across Asia
Speculation over a possible IPO of the secretive commodities
giant, estimated to be worth up to $40 billion, has been rife in
recent months, but bankers told Reuters in June that any public
listing was likely to be years away [ID:nSP449365].
(Editing by David Cowell)