Back in 2007 -- at the height of the private equity bubble -- the Chinese sovereign wealth fund, China Investment Corp. (CIC), agreed to invest $3 billion in Blackstone (NYSE: BX). Of course, it was a disaster. In all, the investment lost roughly two-thirds of its value.
Despite all this, it looks like CIC hasn't given up on Blackstone. In fact, according to the Wall Street Journal (subscription required), CIC is prepared to invest $500 million into a Blackstone hedge fund vehicle.
No doubt, this is a big vote of confidence for Blackstone, which is still a top-notch investment firm. It also is an indication that sovereign wealth funds see compelling values in the markets right now. After all, it looks like the global economy has stabilized.
CIC may actually be poised to invest in more hedge funds (keep in mind that the fund has about $200 billion in assets). Yet, the fund is likely to be selective; that is, by focusing on a few of the funds that have demonstrated a strong performance over the past few years (like Paulson & Co.). In other words, the bigger will get bigger in the alternative asset space.
Tom Taulli is the author of various books, including The Complete M&A Handbook
