Asia's "Berkshire-Blackstone Octopus" Extends Reach

" I owe my success to having listened respectfully to the very best advice, and then going away and doing the exact opposite."

G.K. Chesterton, English writer (1874- 1936)

China Investment Corporation (C.I.C), arguably the biggest hedge fund and sovereign wealth fund in Asia, was recently revealed to be bulking up 4Q2009 assets on U.S. equities. The state-controlled operation which manages upwards of $2 trillion in China's growing forex reserves has been buying stakes in U.S. blue-chip companies many of which are liquid, and likely winning multi-national firms as the growth of the middle class consumer takes hold in the BICs (Brazil, India and China).

The $9.6 billion investments bring to light a new approach in the effort to diversify their U.S. exposure which up to now is/was focused almost exclusively on U.S. Treasury securities. It is a way to "recycle" their foreign exchange earnings which is becoming a very political issue these days. This is good news for the U.S. beleaguered stock markets that have been worrying about who has been buying at these elevated levels. Now we know.

The move also marks continued move away from relying on so-called foreign expertise by moving through large U.S. buyout/hedge fund or banking institutional intermediaries and to go direct in managing national assets. Expect more moves in coming months/years to take stakes in commodity trading operations, shipping companies or even trading exchanges as Asia's dominant SWF finds ways to exploit its growing "buyer power".

CIC will effectively evolve into some hybrid of a Berkshire Hathaway-Blackstone Octopus conglomerate with a footprint in every continent as it lays a foundation for China Inc. industrial foray abroad. They might want to consider hiring a U.S./European advertising company to grow a kinder-gentler global image too. Mahalo.