June 10, 2008 / 5:21 PM / 12 years ago

UPDATE 1-China talks with 8 firms on emrg debt mandates-source

(Adds details, background)

By Sebastian Tong

LONDON, June 10 (Reuters) - China’s sovereign wealth fund is in final talks with eight overseas asset managers that would see each of them run $250-$600 million worth of fixed income funds focused on emerging markets, a source close to the talks said on Tuesday.

“(The Chinese) want different styles from different fund managers and the money should come between June and July,” the source from one of the investment firms told Reuters.

Set up last September, China Investment Corp (CIC) is building up operations that will see it deploy $200 billion of the country’s foreign exchange reserves in order to generate investment returns.

The fund plans to hire external asset managers to allocate some of its investment capital and is currently in the process of finalising contracts with those firms.

CIC’s chosen managers for its emerging-market debt investments are expected to include Wall Street giants Goldman Sachs (GS.N) and Morgan Stanley (MS.N) as well as emerging-markets specialists Aberdeen Asset Management ADN.L, Ashmore Investment and Stone Harbour investment advisers.

Pacific Investment Management Co. (Pimco), the world’s largest bond fund, as well as arch-rival Western Asset Management Co. (Wamco) are also said to be expected to manage a portion of the funds.

The source did not provide the name of the eighth firm involved in the talks.


The overall investment strategy would be conducted “fairly conservatively” for emerging markets-focused funds, the source said.

About 20 percent of the funds will be held in local-currency debt and the remaining 80 percent in U.S. dollar bonds, he added.

CIC, which has earmarked an initial $90 billion for investment overseas, has said that it is keen to step up private equity investments and would also like to gain in-house expertise on commodities and distressed debt. [ID:nL03363010]

The source said the asset management firms are finalising details of the mandates, which are seen as prestigious and possibly paving the way for more business with Chinese state-owned firms.

“The discussion with CIC now is more about the fees but really, that’s not going to be an issue,” he added.

CIC declined to comment on the talks. The firms in question either also declined comment or were not immediately available. (Reporting by Sebastian Tong in London; additional reporting by Eadie Chen in Beijing; editing by Mike Dolan and Stephen Nisbet)

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