Singapore’s GIC has produced its worst performance since the global financial crisis, as the sovereign wealth fund warned of years of low returns.
The Singapore investor’s rolling annualised rate of return slumped to 3.7 per cent for the 20-year period to the end of March, down from 4 per cent a year ago and the lowest since 2009.
GIC, estimated to control US$354 billion of assets, does not issue single-year results but rather releases a 20-year rolling rate. The fund pointed out that the 1997 figure was inflated by the high returns from the beginning of the tech boom.
“Compared to last year, the world has become more uncertain … but the market seems quite happy,” GIC chief executive Lim Chow Kiat told the media. “I hope the market is right, but we are cautious.”
The combination of high valuations across asset classes and the expectation of reasonable growth in GDP meant sluggish returns are likely over the next 10 years, Singaporeans were warned.
GIC is ranked the world’s 10th biggest sovereign investor, according to Sovereign Wealth Centre.
“We are prepared for a period of protracted uncertainty and low returns,” said the 47-year-old who took charge as the CEO in January after a 24-year career at the fund.
GIC said in May that it was selling at a loss about half of its stake in UBS, the Swiss bank which revealed billions in subprime losses in 2007, just as the Singaporean fund was investing in it.
Lim said UBS had improved its position but the performance of the investment had been “disappointing”.
“We have decided to reduce our stake — we still have quite a bit of exposure to the bank — because we have alternative ways of deploying the capital,” the GIC boss said.
He added that student accommodation, with high yields compared with offices space, was a successful sector.
“Two years ago, we said the market would return x over the next 10 years. We would argue half of the X was returned in the first year, year and a half,” said Jeffrey Jaensubhakij, GIC’s investment chief. “Now there is only half an X over the next eight and a half years.”
GIC had 34 per cent of its portfolio allocated to the US this year, 12 per cent to the eurozone and 6 per cent to the UK: broadly similar to last year.
Lim said GIC was confident about the UK economy “despite difficulties we are seeing in the Brexit process”.
