18. The SWF’s investment policy should be clear and consistent with its defined objectives, risk tolerance, and investment strategy, as set by the owner or the governing body(ies), and be based on sound portfolio management principles.
18.1. The investment policy should guide the SWF’s financial risk exposures and the possible use of leverage.
18.2. The investment policy should address the extent to which internal and/or external investment managers are used, the range of their activities and authority, and the process by which they are selected and their performance monitored.
18.3. A description of the investment policy of the SWF should be publicly disclosed.
Four principles underlie our investment activities. We invest on a commercial basis. Our objective is to seek maximum returns for our shareholder within acceptable risk tolerance. We are a financial investor and do not seek control of the companies in our portfolio. We are a responsible investor, abiding by the laws and regulations of China and recipient countries and conscientiously fulfilling our corporate social responsibilities. We pursue investments based on in-depth research within our asset allocation framework to ensure a prudent and disciplined decision-making process.
CIC follows a set of investment philosophies, which is firmly based on its institutional characteristics and understanding of investment management. CIC takes a holistic and disciplined approach to strategy design and portfolio construction, analysis, and management to ensure a well-disciplined portfolio with integrity and stability. As a long-term investor, CIC is well positioned to withstand short-term market volatilities and capture illiquidity premiums. CIC continues to pursue risk diversification by spreading allocation across asset classes and sectors in a bid to reduce portfolio volatility and curb downside risks.
As a large, long-term institutional investor, CIC has always attached great importance to constructing a simple, transparent, and resilient portfolio, and made ongoing efforts to optimize asset allocation and portfolio management. CIC adopts the “Reference Portfolio - Policy Portfolio - Actual Portfolio” framework for asset allocation, and takes a holistic and disciplined approach to strategy design and portfolio construction, analysis, and management to ensure portfolio integrity and stability. The return on the total portfolio is determined by reference portfolio selection, policy portfolio construction, and actual portfolio management.
The Reference Portfolio consists of public market equity and fixed-income indices and anchors the long-term neutral risk target of the total portfolio.
The Policy Portfolio introduces additional asset classes and serves as a medium- to long-term neutral portfolio for improved returns and risk diversification; manages intra-asset allocation to optimize the investment footprint across geographies, sectors, industries, themes, and risk attributes; and further enhances the risk-return profile through dynamic allocation adjustments.
The Actual Portfolio ensures the effective implementation of the policy portfolio by managing total portfolio exposure and generates alpha via active management by the investment team
The above-mentioned information is disclosed via the public disclosure channels (www.china-inv.cn/chinainven/Media/Press_Releases.shtml).