China’s $941 Billion Sovereign Wealth Fund Cuts Active Portfolio After Manager Leaves

(Bloomberg) --

China’s $941 billion sovereign wealth fund shifted more than 60% of one of its largest actively managed equity portfolios to passive strategies after its long-time manager Susan Gao left, according to people familiar with the matter.

China Investment Corp. has transferred most of the more than $10 billion in the Global Large Cap Value Equity Portfolio to funds tracking indexes, the people said, declining to be identified discussing internal matters. The remaining portfolio has newly promoted managers running fundamental large-cap and digital-economy stocks, they said.

Gao built CIC’s proprietary equity team from scratch over the last decade, during which her funds consistently beat the benchmark MSCI ACWI Index, people familiar said earlier. She joins a slew of departures from CIC at a time when the fund is looking to invest in more resilient assets following the virus-induced volatility of the first quarter.

CIC’s press department didn’t respond to an emailed request seeking comment.

Gao resigned in April for personal reasons, joining Wallace Yu, who left the same month after leading the multi-asset team.

The departures of market-beating managers could erode Beijing-based CIC’s performance, especially amid volatile markets battered by the pandemic. Gao’s portfolio ranked in the top quartile among global peers, according to the CIC. She beat the benchmark by 19 percentage points since its independent accounting started in April 2013 through the end of 2016, according to an internal book compiled by CIC in 2017 to mark the company’s 10-year anniversary.

More Resilience

CIC is fine tuning strategies this year amid the turmoil, looking for “more resilient” assets to boost long-term results, Executive Vice President Zhao Haiying said in an interview in May. The fund’s overseas investments returned about 17% last year based on unaudited results, she said, as global stocks rallied.

The sovereign fund has been bolstering internal management of investments to cut costs and enhance its own investment capabilities. Self-managed assets accounted for 42% of overseas investments as of December 2018, up almost 10 percentage points from five years earlier, according to its 2018 annual report. Several of its proprietary portfolios “substantially outperformed their benchmarks and their peers since inception,” CIC said in its 2017 yearly review, without providing further details.

Gao, a managing director who previously worked at Boston-based Wellington Management Group LLP, joined CIC in 2009. She often worked 12 hours a day to cover global markets, shared her experiences to train other members, and led the development of the team’s value investing principles, according to the book, a copy of which was obtained by Bloomberg.

CIC has lost at least three front-office managers in as many months, extending a string of senior executive departures since 2017. Roslyn Zhang, who was in charge of hedge fund allocations, resigned at the end of last year. Other departures include Zhang Qing, who was executive vice president of direct investments, and Winston Ma Wenyan, who stepped down as head of the North America office in early 2018.

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With assistance from Bloomberg