Singapore’s sovereign fund, GIC, said it had achieved an annualised real rate of return of 4.2% over the 20-year period ending March 31 2022, which was higher than the global inflation rate during the same period.
GIC’s annualised nominal return was 7% for the past two decades, per its 2021-22 report.
“Today, investors are facing a rapidly shifting investment landscape with profound uncertainties emerging on multiple fronts. The macroeconomic environment has entered a high-inflation regime, driven by supply-chain disruptions, a rapid recovery in demand, and rising wages. In addition, the world is facing increased risk of fragmentation as geopolitical tensions continue to rise,” said GIC CEO Lim Chow Kiat.
Under such uncertainties, he added, GIC has doubled down on diversifying its investment portfolio, which has helped cushion the fund’s performance from the market correction in early 2022.
“This posture was held throughout FY2021-22, given elevated asset valuations and uncertainty arising from potential inflationary pressures. We have kept our emphasis on being prepared for multiple scenarios, maintaining price discipline, adding optionality and expanding our bottom-up investment activities,” GIC said in the report.
It has continued to gradually increase the share of private equity and real estate while reducing its exposure to public equities and nominal bonds and cash.
Within private equity, GIC’s technology investment group was set up in 2017 with a conviction in “creating an alpha strategy” that could invest in and help technology companies grow from private startups through to publicly listed companies.
A secondaries-dedicated team was also established in 2016 to ramp up this asset class.
“We had been invested in PE secondaries funds for a long time but wanted to give this strategy a major push. We aimed to scale up by doing co-investments and direct deals where GIC’s capacity for illiquidity was an advantage,” said Tan Hwee Loo, founding head of secondaries PE.
Concurrently with the launch of the report, GIC also announced the establishment of a dedicated Sustainability Office, which will deepen the fund’s research into key sustainability issues and push to integrate sustainability into its investment and corporate processes.
“We believe that it is critical to focus on making a positive impact in the real economy. To do this, it is more constructive to actively engage and support companies in their transition towards long-term sustainability than to mechanically divest from certain industry sectors,” GIC said in the report.
For example, GIC revealed that its PE team established the Electron Innoport, a global portfolio of funds and direct and co-investments that provides exposure to early-stage energy transition opportunities.