BlackRock, CIC may start investment fund, sources say

BlackRock Inc, the largest money manager in the world, plans to start a fund with China Investment Corp, according to a person familiar with the matter.

CIC, China's sovereign-wealth fund, and BlackRock will initially provide capital for the investments, which are to go into Chinese companies and businesses that sell products in China, said the person, who asked to not be identified.

The joint venture will be managed by Liu Erh-fei, who will leave his position as chairman of Bank of America Corp's brokerage operations in China, the person said.

Laurence D. Fink, chairman and chief executive officer of BlackRock, said during a conference call with analysts and investors last year that BlackRock is interested in expanding in Asia. BlackRock, based in New York, had $3.68 trillion in assets under its management by March 31.

"BlackRock is partnering up with one of the biggest sovereign wealth funds, a big name with big connections, someone who will open doors and raise their profile," said Fraser Howie, a Singapore-based managing director at CLSA Asia-Pacific Markets, a unit of the retail banking group Credit Agricole SA.

"CIC is looking to diversify the way it invests, basically tying up with an established partner to try to do more things."

CIC assets

Bobbie Collins, a spokeswoman for BlackRock, declined to comment on the possible deal.

Two calls to CIC's public-affairs office in Beijing weren't answered. Selena Morris, a spokeswoman for the Charlotte, North Carolina-based Bank of America, didn't immediately return calls.

CIC, which was set up in 2007 with $200 billion from the Ministry of Finance, had $410 billion in assets at the end of 2010, according to its latest annual report.

The fund posted an 11.7 percent return on its overseas investments in 2010, it said in July.

The business newspaper Financial Times reported previously about the possible deal, quoting both Hu Bing, a senior CIC official who spoke about the proposed fund at a conference in Beijing, and unidentified sources who are familiar with the matter.

The fund's primary investments would be into companies that are outside of China and have technologies or resources that are useful to the country, the unidentified people told the Financial Times.

It could, for example, join Chinese companies to invest in international acquisitions or take stakes in the Chinese operations of multinational companies, they said.

BlackRock stake

In its first quarterly disclosure of its US stock holdings in February 2010, CIC revealed it held a $714 million stake in BlackRock.

CIC has been making more international investments to help boost returns on the country's foreign exchange reserves and meet the nation's demand for resources.

In January, it bought an 8.68 percent stake in Thames Water Utilities Ltd, the biggest UK water and sewerage company.

It will buy 25 percent of the former South African politician Cyril Ramaphosa's Shanduka Group for 2 billion rand ($252 million), the company said on Dec 22.

It also agreed to join Singapore's Global Logistic Properties Ltd to buy 15 warehouses in Japan last month.

CIC has about 60 percent of its assets in the US, Jin Liqun, chairman of its supervisory board, told CNBC in December.

Russia fund

GDF Suez SA and CIC signed an agreement pertaining to a 2.3 billion euro ($3 billion) minority investment in GDF Suez's exploration and production division and CIC's purchase of a 10 percent stake in a plant where liquefied natural gas will be made.

Last year, CIC committed $1 billion toward a Russian private-equity fund championed by President Dmitry Medvedev.

CIC began investing in the US amid the credit crunch in 2007, buying stakes in Blackstone Group LP and Morgan Stanley that year.

Bloomberg News