China's CIC inks deal with JC Flowers to launch US$4 bln fund

China Investment Corp (CIC), the country's US$200 billion sovereign wealth fund, has inked a deal with New York-based private equity firm J.C. Flowers & Co to launch a US$4 billion private equity fund, despite mounting concerns over the sub-prime credit defaults, market sources reported on Thursday.

Under the terms of agreement, CIC will become a limited partner of the new private equity fund, in which CIC will make approximately 80% of the contributions. The U.S. equity firm will provide about 10% of capital, and the remainder will be made up by several other partners. Meanwhile, the source disclosed that general partners have already been selected.

In addition, the fund will be run by J.C. Flowers, while CIC will not be involved in regular management. However, the Chinese firm will be briefed by J.C. Flowers on certain magnificent investments, the source said.

The deal will become the first private equity fund to be launched by the Beijing-based company since it was set up by the Chinese government in September 2007, in line with its plan to diversify its investment portfolio and to gain better returns from global markets.