SINGAPORE: Singapore sovereign wealth fund GIC on Tuesday said its long-term returns held steady in the year to March but it had changed its investment mix amid fears of greater volatility ahead.
In an annual report, the Government of Singapore Investment Corporation said it reduced its exposure in developed markets, cut its holdings in equities and bonds, and started building up cash holdings for future opportunities.
Its assets earned a 3.9 percent real rate of return on a 20-year annualised basis, the same as in the previous financial year, GIC said.
GIC cited the European debt saga and anaemic US economy as the key risks.
“Investment returns are likely to be low until the global economy returns to balanced and sustainable growth,” said Ng Kok Song, GIC’s group chief investment officer.
“The emerging economies led by China will have higher and more robust growth but are not yet of a sufficient scale to offset anaemic growth in the developed economies.”
GIC, which manages Singapore’s vast financial reserves, does not give an absolute figure for its annual performance, saying it always invests with a long-term horizon in mind.
But it says it manages “well over US$100 billion” in funds.
The latest available data from the Monetary Authority of Singapore, the central bank, put the country’s foreign reserves at $243 billion in June.
According to the US-based Sovereign Wealth Fund Institute, GIC is the eighth largest state investment fund in the world with $247.5 billion under management. The Abu Dhabi Investment Authority is the largest with assets of $627 billion.
Song Seng Wun, a regional economist with CIMB Research, expects GIC to continue with its conservative policies.
“After all, higher return can only come with higher risks and sovereign wealth funds, being what they are, do not take risky bets,” Song told AFP.
“All we can say is that with the last few years being so volatile, and last year being no exception, it will be commendable if they can continue to maintain the nearly four (percent) annualised real rate of return.”
GIC said the Americas region including the US accounted for 42 percent of its overall portfolio, which was the same in the previous year, but its exposure to Europe has been cut to 26 percent from 28 percent.
Its exposure to Asia increased slightly to 29 percent from 27 percent while the remaining three percent was concentrated in the Australasia region.
Temasek Holdings, Singapore’s other sovereign wealth fund, announced earlier this month its net profit fell 15.4 percent in the year to March to Sg$11 billion ($8.8 billion).
GIC said it has increased cash in its portfolio and expects investment returns to be low until the global economy returns to “balanced and sustainable growth”.
While the allocation to cash for the year-ended March rose to 11 percent from 3 percent last year, GIC’s exposure to public equities fell to 45 percent from 49 percent.
Allocation to bonds dropped to 15 percent from 20 percent last year as yields in the developed markets were pushed down to low levels.
“Due to the heightened uncertainty in global markets, we allowed the cash inflow from investment income and fund injection to accumulate during the year in preparation for better investment opportunities,” Ng said.