Singapore— Singapore’s GIC, the eighth largest sovereign investor around the globe, has said that this year, it is more careful about the investing environment than it was last year. The sovereign wealth fund has also said it is getting ready for low returns because of the slowdown in economic growth, as well as current conditions of high valuations.
GIC’s major concern at the moment revolves around political and policy uncertainty, specifically the China-US trade war. In order to prevent experiencing the heavy impact of these trade tensions, GIC is investing in nations like Vietnam, to whom a shift in the supply chain is actually beneficial.
The CEO of GIC, Lim Chow Kiat, told media outfit Reuters,
“We are more concerned, even more concerned compared to last year because the developments over the last 12 months have been more negative than even what we were thinking about.”
The Sovereign Wealth Fund Institute lists GIC’s assets at $390 billion (SG $529 billion). GIC manages the bulk of the financial assets of the government, and also invests in various assets. Its far-reaching aim is to beat inflation worldwide.
Temasek Holdings, on the other hand, concentrates on equities.
To show its current attitude of caution, the allocation of bonds and cash of GIC increased to 39 percent at the end of FY 2018, its highest ever. In the year before it was 37 percent, and five years ago it was 31 percent.
Since last year, the Chinese and US governments have added more tariffs on the imports from each other’s countries, which has contributed to trade tensions.
According to Mr Lim, “There are developments or events that could cause investment losses or lower returns.”
Reuters reports that the portfolio of GIC returned 4.9 percent per year in nominal U.S. dollar terms over a five-year period that concluded this March, lower than a 6.6 percent in the period that ended at the same time the year before.
GIC’s reference portfolio of 65 percent in global equities and 35 percent in bonds returned a yearly 5 percent in the five years that concluded last March.
For its main performance gauge, the company reported an annualised rolling 20-year real return of 3.4 percent for the last year, similar to the previous year.
This year has seen a rally in financial markets. The S&P 500 <.SPX> and China’s biggest markets have risen almost 20 percent in the first half of the year. This has given hope that the global bull-run, which has lasted 10 years, is not over, as experts have thought.
However, Mr Lim has said that GIC continues to exercise caution.
The company is not overly concerned about Hong Kong, despite recent massive protests that have affected investors and sparked the transfer of funds to other markets, including Singapore.
Mr Lim said, “Hong Kong is an important business and financial centre. It is important that it continues to play those roles because businesses need Hong Kong, investors need Hong Kong.”
It was recently announced that the country’s sovereign wealth fund, is reportedly planning to invest approximately S$1 billion in Indian infrastructure, specifically for buying operating toll and annuity road assets, in order to strengthen its presence in India. Two months ago, GIC, together with private equity firm KKR, invested ₹2,060 crore in IndiGrid, an infrastructure investment trust (InvIT) sponsored by Power Grid Ventures). Eight transmission lines of 1,936 circuit km and two 6,000 MVA substations are currently owned by IndiGrid./ TISG