Greater Presence for China’s SAFE in U.S.

waterrunsEmbracing a risk-on perspective, a miniscule but growing portion of China’s foreign currency reserves are being allocated toward illiquid assets. China’s State Administration of Foreign Exchange (SAFE) has created subsidiaries to invest reserve assets in a variety of investments including public equity, private equity and real estate.

SAFE has opened up a New York office on Fifth Avenue in Manhattan to focus on alternative investments in the United States. Core real estate can add value to a long-term investment portfolio due to its asset class characteristics such as rental income. This new office is separate from the initial U.S. office that concentrates on fixed income instruments such as government bonds, corporate bonds and asset-backed securities. With regard to alternative assets, in 2012, SAFE invested US$ 500 million in a private real estate fund managed by the Blackstone Group LP. SAFE’s counterpart in China, the China Investment Corporation, back in 2007 purchased a sizable stake in the Blackstone Group LP.

SAFE has the largest pool of foreign exchange holdings and is under pressure to diversify away from U.S. government debt.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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