Q: Does that mean that China is bearish on the U.S. market?

Hard to say. It's likely that CIC has much more invested in the U.S. and elsewhere on its behalf by outside managers. Some estimate CIC has put more than $25 billion into markets through outside managers. CIC hasn't released any indication of the size of those allocations in 2009, which will probably only be disclosed in its annual report later this year. It has also placed billions of dollars into fixed-income products, hedge funds and private equity funds. None of those are covered by its 13F filing with the SEC.

Senior CIC officials, including Chairman Lou Jiwei, have said in the past that they believe there are better investment opportunities in emerging markets, including China. Many foreign investors take a similar view, and U.S. investors pumped a record amount of money into overseas mutual funds last year. However, CIC retains large stakes in U.S. financial firms including Morgan Stanley and Blackstone Group, despite the decline in the value of those investments.

Q: What does the filing tell us about CIC's strategy?

It appears that CIC is giving its in-house portfolio managers a chance to construct investing strategies with a tiny proportion of CIC's own money to deploy into relatively blue-chip companies that they believe either have strong growth prospects or are undervalued. Names on the list such as insurer AIG and Citigroup were hit hard in the financial crisis and would benefit from a rebound in the U.S. economy. Interestingly, CIC held a $5 million stake in Burlington Northern Santa Fe Corp., a company that at the end of 2009 was in the middle of a takeover offer from Warren Buffett's Berkshire Hathaway Inc. The strategy of holding stakes in companies in the middle of takeovers is called "merger arbitrage." It's a common hedge-fund strategy and depends on the ability of a fund to read the likelihood of a deal being completed better than the market.

Q: Is China's sovereign wealth fund becoming more transparent by making such a disclosure?

The SEC requires any institutional investors holding over $100 million in U.S.-listed securities to submit the same sort of 13F filing that CIC made. So it's fair that CIC wasn't doing this because of a desire for transparency, even if transparency is the end result.

In fact, CIC's president, Gao Xiqing, has said he doesn't believe it's smart for CIC to reveal its holdings and positions because it allows the market to move against them. This is a similar view that many hedge funds take, and they also have to file Form 13Fs to the SEC, which are usually disclosed. A few managers, such as Mr. Buffett, sometimes receive exemptions because they are pursuing trading strategies that take place over extended periods of time, which they argue could be adversely impacted by other market participants knowing certain holdings. But that's ultimately the SEC's call, not the manager's

Eoin Treacy's view In the context of a fund with $300 billion under management the deployment of less than $10 billion in US assets is comparatively small and could easily be matched by a number of US hedge funds. Even if CIC has used outside managers to invest more than this amount in the USA, the figure is still comparatively small relative to the size and fund and particularly the capital markets of the USA. However, where CIC is investing gives us a clue to its long-term strategy and it is interesting that according to the SEC filing, many of their holdings fall into line with Fullermoney's long-term themes.

This additional article by Tim Smith for Bloomberg, dated December 21st, carries details of some additional larger global investments. Here is a section:

The sovereign fund bought a 15 percent stake in Arlington, Virginia-based AES Corp. and its wind-generation business for $2.2 billion in November. It acquired an 11 percent stake in a unit of Kazakhstan's state-run energy company, JSC KazMunaiGas Exploration Production, in late September for about $939 million.

Wind, coal, gas, oil, precious metals, industrial metals (through Teck Resources) and financials such as Citigroup and Blackrock dominate the disclosed investments of CIC. We can probably assume that the fund also has a mandate to buy domestic Chinese shares or support nascent enterprises through private equity but it has no requirement to share this information. Sovereign wealth funds, generally, are relatively secretive about their dealings because they tend to hold positions for the long-term and often build positions over time. If their actions were publicly known such a strategy would be considerably more difficult to follow.

The concentration of investments in the commodity sector can be seen both as CIC betting on China's continued growth in per capita consumption of commodities and as an effort to ensure that China shares in the financial benefits of that growth. Investments by China in order to secure access to resources, particularly in Africa can be seen through the same lens as ensuring that the raw materials for development are available.

CIC's investments in gold ETFs are also noteworthy because China has demonstrated over the last decade that it is growing the percentage of gold in its reserves and it may view ETFs as a way of doing this without having to declare that it has increased its physical gold holding.