China pension fund plans foreign private equity deals

HONG KONG (Reuters) – China’s national pension fund, the National Social Security Fund, is seeking cabinet approval to invest billions of dollars in foreign private equity funds this year, sources told Reuters on Monday.

The NSSF is working on a formal proposal with China’s finance ministry and the Ministry of Human Resources and Social Security, which also supervises the pension fund, to detail its plans, said the sources who had been briefed on the matter.

“The goal and the path is very clear while the only question is when it can win the final approval as it does need time to fix all these important details,” said one of the sources, adding the finance ministry agreed in principle to let the plan go forward.

Final approval is expected in the second half of this year and the NSSF aims to complete its first foreign private equity deal before the end of 2009, said the source.

“Timing is important. You of course do not want to do a deal when the market already fully recovers,” he said.

the NSSF aims to invest no more than 10 percent of its roughly US$80bn in total assets, or about US$8bn, in both domestic and global private equity funds, said the sources.

The sources declined to be identified due to the sensitive nature of the matter, while a representative for the NSSF was not be immediately available for comment.

The fund is already permitted to invest in domestic yuan-denominated private equity funds but it is not yet allowed to commit its capital to any foreign private equity funds.

Last June, Dai Xianglong, the head of the national pension fund, announced it had agreed to invest Y2bn in each of two domestic private equity funds launched separately by CDH Investments and Hony Capital.

Last month, Dai said at a forum that the NSSF was looking for at least 3-5 private equity funds to help it manage part of its Y563bn portfolio though he didn’t say whether the NSSF would invest in domestic or foreign funds.

By George Chen, Asia Private Equity Correspondent