Singapore's GIC Sees Green Shoots in Uncertain Global Environment

Singapore's GIC Sees Green Shoots in Uncertain Global Environment

GIC manages more than $453 billion in assets and ranks as the world's seventh-largest sovereign wealth fund by total assets

Singapore's sovereign-wealth fund GIC Private Ltd. remains cautious on uncertainty related to the pandemic and inflation concerns, but sees new growth opportunities emerging in areas including technology, sustainability and the reconfiguration of global supply chains.

GIC said in its annual report Friday that it expects global economic recovery to continue amid fiscal stimulus and monetary-policy support, albeit at different rates and with a wide range of potential outcomes over the medium- and long-term.

It added that with valuations stretched as investors price in a strong economic recovery, it expects returns across a broad range of asset classes to be low over the next 5 years to 10 years.

At the close of the fiscal year ended March, the sovereign-wealth fund's exposure to emerging market equities was up 2 percentage points on year to 17% of its total portfolio. Exposure to developed market equities remained at 15%.

Holdings of nominal bonds and cash fell to 39% from 44%, a reversal of last year's increase, as equities markets rallied world-wide relative to fixed income. The fund's share of assets in private equity and real estate rose due to "robust deal activity and strong asset performance," GIC said.

GIC manages more than $453 billion in assets and ranks as the world's seventh-largest sovereign-wealth fund by total assets, according to the U.S.-based Sovereign Wealth Fund Institute. GIC doesn't disclose its assets under management.

GIC, which manages Singapore's foreign-exchange reserves and owns stakes in Citigroup Inc. and UBS Group AG, said it continues to take a long-term view of its investments. The 20-year annualized U.S. dollar nominal return of its portfolio was 6.8% in the period ended March, the report showed. Its average real rate of return--over and above the global inflation rate--was 4.3% in the period.

The U.S. remained GIC's largest geographical area of exposure in the latest year, accounting for 34% of the fund's portfolio. Asia ex-Japan was second at 26%.

GIC said it sees investment opportunities in the acceleration of technological transformation, growing demand in the sustainability space and in meeting the needs of companies altering supply chains amid ongoing geopolitical tensions.

"There is growing global recognition that more resilient, long-term global economic growth will depend on a shift to sustainable practices," GIC Chief Executive Lim Chow Kiat said in the report. On technology, he noted that the pandemic had boosted development in areas such as telemedicine, digital payments and online entertainment.

GIC expects economic recoveries from the pandemic to continue, but cautioned that over the longer term the range of outcomes "widens substantially."

"While policy stimulus in major economies has helped cushion the impact of lockdowns on household income, job losses, and corporate insolvencies, exiting from such extraordinary policies could be challenging," it said. A strong recovery and abundant liquidity could boost inflation, potentially limiting policy accommodation, it added.

GIC plans to open an office in Sydney next year, adding to 10 global offices that manage assets in more than 40 countries.



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