12.4% returns in US$ terms over five years; 4.1% real return over 20 years
BY ALVIN FOO ECONOMICS CORRESPONDENT, Straits Times
SINGAPORE investment fund GIC posted brighter returns on the nation's nest egg as the world economy kept growing and financial markets stayed robust.
Over five years to March 31 this year, GIC's assets across the globe returned 12.4 per cent in US dollar terms – well above the 2.6 per cent for the five years to March 31 last year.
The big jump came as worldwide markets kept rebounding strongly from the lows of the 2008-2009 global financial crisis. "Its five-year returns improved significantly because the 2008 bear market has been flushed out,'' said APS Asset Management founder and chief investment officer Wong Kok Hoi, who used to work at GIC.
Taking a longer view over 20 years – as sovereign wealth funds tend to do – GIC reported a steady 4.1 per cent annualised real rate of return, according to its latest annual report released early this morning. This was up from 4 per cent for the 20 years ending a year earlier.
That meant that it made a return averaging 4.1 per cent a year on top of having guarded its portfolio value against global inflation over the 20 years ended March 31. In nominal US dollar terms, the return was 6.5 per cent.
"These are challenging times for all investors, including GIC. Asset yields are low, and all major asset classes are facing potentially low future returns," said GIC chief investment officer Lim Chow Kiat. He added that financial assets will see "diminished returns" as "monetary policy normalises and interest rates rise".
Last month, Singapore investment firm Temasek Holdings released its annual report. Its 20-year annualised total shareholder return – the return to shareholders as if it held the portfolio directly – was 6 per cent.
GIC is the eighth-largest state fund globally, with an estimated US$320 billion (S$399 billion) of assets under management, according to the United States-based Sovereign Wealth Fund Institute.
The biggest is Norway's Government Pension Fund Global, with around US$878 billion of assets, while Temasek ranks No. 10 with US$177 billion of assets.
The mix of GIC's portfolio changed over the year.
Its asset mix of developed markets stocks fell from 36 per cent to 29 per cent, while that of emerging markets equities rose from 17 per cent to 19 per cent.
In terms of geographical distribution, its Europe share rose from 25 per cent to 29 per cent while its Asia share dipped a little from 28 per cent to 27 per cent.
Highlights for GIC in the year included expanding its global footprint by opening its 10th office – in Sao Paulo, Brazil in April.
Over 10 years, GIC posted a return of 7 per cent, down from 8.8 per cent the previous year. Analysts who track GIC called its performance "relatively stable" despite increased market volatility.
"We are seeing a flurry of GIC investment activity around the world especially in emerging markets, and that's much more than before," said CIMB regional economist Song Seng Wun.
Yesterday, GIC announced that former Temasek Holdings chairman S. Dhanabalan would be rejoining the GIC board as a director. He was a founding GIC board member at the time of its inception in 1981, serving on the board for more than 20 years before stepping down in 2005. "He brings with him extensive experience in finance and a strong sense of duty to invest well for Singapore's future," said GIC group president Lim Siong Guan.