GIC says economic, investment climate still 'challenging'

The Government of Singapore Investment Corp., the city’s sovereign wealth fund, said the investment environment remains “challenging” as developed countries recover and emerging markets pose inflation risks.

GIC, manager of more than US$100 billion ($120.8 billion) of the country’s reserves, boosted investments in emerging economies to tap their potentially higher returns and improved macroeconomic fundamentals. It expanded the number of countries it invests in as well as its range of investment tools.

“The sustainable recovery of the developed economies remains uncertain, while the emerging economies face challenges in restraining inflationary pressure and currency appreciation,” Chief Investment Officer Ng Kok Song said in an e-mailed statement today. “GIC will continue to respond nimbly to this challenging environment and maintain its focus on delivering good long-term investment returns.”

The fund, the biggest investor in companies including Citigroup Inc. and UBS AG, seeks to boost assets to tackle future crises and meet the country’s long-term spending needs. GIC is ranked the world’s eighth-largest state investment company by Sovereign Wealth Fund Institute.

The 20-year so-called nominal annualized rate of return was 7.2% in US dollar terms as of end-March, said GIC, established 30 years ago. The annualised real rate of return, in excess of global inflation, rose to 3.9% in the year ended March from 3.8% in the previous 12 months, it said.

Shorter-Term Returns
The investment company also published five-year and 10-year nominal rates of returns for the first time. Annual returns in the past five years, net of fees, was 6.3%, with a volatility of 12%, while the 10-year rate was 7.4%, with a volatility of 10%, according to the statement, released along with its annual report.

Investments in emerging-market stocks made up 15% of its holdings from 10% a year earlier, while those in developed economies fell to 34% from 41%, it said in the report. The overall holdings in equities dropped to 49% from 51%, it said, while bonds make up 22% now, from 20% a year earlier.

GIC’s long-term view on Citigroup and UBS “remains unchanged” even with higher capital requirements that are likely to reduce the banks’ future profitability, the Business Times reported today, citing Ng’s comments at a press conference.