China Investment Corporation continues to shed top executives as the world’s second-largest sovereign wealth fund reportedly struggles to retain top talent amid weakening returns.
The $941 billion fund saw three top executives resign since April, according to a «Bloomberg» report, alongside 17 team heads and managing directors in recent years.
The attractiveness of working for CIC has been weakening due to growing constraints, the report added, citing current and former managers at the firm. These include new investment management priorities, limited upward career mobility and relatively uncompetitive compensation.
New Priorities
After the State Administration of Foreign Exchange (SAFE) decided to diversify its own investments in recent years, CIC has placed less strategic importance on returns and more on protecting the reserves, according to Li Jie, head of foreign reserves research center at Beijing’s Central University of Finance and Economics.
What’s more, CIC has received little fresh capital for deployment after 2012 and greater difficulty sourcing deal-making opportunities due to increased protectionism against China has left the sovereign wealth fund’s investment managers even less motivated, according to an unnamed source. This led CIC, at one point, to table the idea of managing external money before rejecting the suggestion due to regulatory and technical challenges.
«There’s no doubt that CIC’s appeal to talent in the market has been declining,» Central University of Finance and Economics’ Li said, adding that talent outflow at CIC has reached a level that now threatens to damage its overall returns.
Limited Mobility and Pay
Another challenge for talent retention at CIC is limited promotion opportunities, sources added, especially once executives have reached the managing director or department head level. And if further elevated, they could even face pay cuts due to strict restrictions on senior cadres which are often appointed by the Communist Party.
And even without a cut, top CIC executives earn just one to two million yuan ($290,000), a far cry from their high-flying colleagues on Wall Street.
CIC had 205 investment professionals managing its overseas portfolio, as of June 30 this year, which reportedly averaged 6.1 percent in annual returns in the decade through 2018, including 17 percent gain last year.
