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“The annualized nominal rate of return in U.S. dollar terms over 20 years was 6.5percent, underperforming a portfolio GIC had created as a benchmark with65 percent of holdings in stocks and 35 percent in cash, it said. Over the past decade, its 8.8 percent return beat the portfolio’s 8.6 percent gain as itincreased its investments in stocks, it said.”
GIC Seeks Flexibility to Tackle MoreComplex Investment Outlook
By Klaus Wille - Aug 1, 2013
GIC Pte,manager of more than $100 billion of Singapore’s reserves, is changing itsinvestment strategy for the second time in three decades to be more flexible asthe global outlook becomes “complicated.”
GIC willsplit its portfolio into one that’s actively managed, and another that tracksthe overall market, it said as its annual report showed returns were littlechanged. The company was set up in 1981 as a “contingency fund” with aportfolio that’s as much as 70 percent invested in bonds and cash, before areview in 2000 defined it as a “financial endowment,” which saw equitiesaccounting for 65 percent of holdings, it said.
“In the past 30 years, if you put money into stocks or bonds, you just rode the wave ofdeclining interest rates and made money,” Leslie Teo, chief economist at thesovereign wealth fund, said in an interview yesterday ahead of the release of GIC’s annual report. “In the future, things won’t be so straightforward. Marketreturns will likely not be as high. Investors will need to be more nimble andskill-based active management may be an additional source of returns.”
The changegives GIC room to shift funds across asset classes as it adapts to challengesafter the 2008 global financial meltdown, the European debt crisis and China’sslowdown restricted investment gains. It will also allow the fund to bettermanage its portfolio amid rising bond yields as the U.S. Federal Reserveconsiders tapering stimulus with the economy recovering.
Main Metric
GIC’s 20-yearannualized real rate of return, or gains on top of global inflation that ituses as its main metric, was 4 percent as of March 31, up from 3.9 percent theprevious year, it said in its annual report today. The MSCI World Index gained 9.3 percent during GIC’s fiscal year.
“Through thenew strategy, we are not aiming for higher risk in our overall investmentprocess,” Chief Investment Officer Lim Chow Kiat said in the interview. “We arejust clarifying which returns stem from the market and which are based anparticular investment skills.”
GIC’s focus remains on long-term investment results, he said.
The annualized nominal rateof return in U.S. dollar terms over 20 years was 6.5 percent, underperforminga portfolio GIC had created as a benchmark with 65 percent of holdings instocks and 35 percent in cash, it said. Over the past decade, its 8.8 percentreturn beat the portfolio’s 8.6 percent gain as it increased its investments instocks, it said.
Five-Year Return
The five-yearreturn was 2.6 percent, compared with a 3.4 percent gain in the portfolio, itsaid. The fund, which is owned by the government, doesn’t release yearly returnfigures or the size of its assets under management.
GIC is rankedthe world’s eighth-biggest state fund by the Roseville, California-basedSovereign Wealth Institute, which valued its portfolio at $248 billion. TemasekHoldings Pte, Singapore’s state-owned investment company that’s operatedseparately from GIC, said last month its assets rose 8.6 percent to a recordS$215 billion ($169 billion) in the year ended March 31.
Norway’sGovernment Pension Fund Global, the world’s biggest, posted a return of 13.4 percent in 2012, the second best in its history, the Oslo-based investor said in March.
More Stocks
Equities at GIC increased to 46 percent in the year ended March from 45 percent a yearearlier, it said in the annual report. Bonds rose to 21 percent from 17 percentand it reduced cash holdings to 7 percent from 11 percent a year earlier, itsaid. Alternative assets, consisting mainly of real estate, private equity andcommodities, declined to 26 percent from 27 percent.
CitigroupInc. (C) and UBS AG (UBSN), GIC’s two biggest holdings, helped returns.Citigroup increased 21 percent and UBS climbed 15 percent during the fund’sfiscal year. The banks, which GIC bought during the global financial crisis,remain long-term investments, Lim said.
"The financial sector in the West has been healing from the damage of the crisis,with banks building up capital and reporting better profits," he said."UBS and Citi have benefited from that healing process."
GIC’sholdings in Europe declined to 25 percent of its portfolio, down one percentagepoint from the previous year, according to the report. Those in the U.K. fellto 8 percent from 9 percent, while investments in the euro area were unchangedat 11 percent.
Assets in theAmericas rose as the U.S. increased to 36 percent of GIC’s portfolio from 33percent a year earlier. Those in Asia fell to 28 percent from 29 percent asJapan made up 10 percent of the portfolio from 12 percent, it said.
GIC doesn’texpect the Fed to raise interest rates by 200 basis points to 300 basis pointsin the year or two, Lim said.
“The world still needs a clear reminder that global economies have not fully recoveredfrom the global financial crisis,” Lim said. “The U.S. central bank’s effect isfar and wide, especially for economies and companies that depend on foreign liquidity.”
GIC Seeks Flexibility to Tackle MoreComplex Investment Outlook
By Klaus Wille - Aug 1, 2013
GIC Pte,manager of more than $100 billion of Singapore’s reserves, is changing itsinvestment strategy for the second time in three decades to be more flexible asthe global outlook becomes “complicated.”
GIC willsplit its portfolio into one that’s actively managed, and another that tracksthe overall market, it said as its annual report showed returns were littlechanged. The company was set up in 1981 as a “contingency fund” with aportfolio that’s as much as 70 percent invested in bonds and cash, before areview in 2000 defined it as a “financial endowment,” which saw equitiesaccounting for 65 percent of holdings, it said.
“In the past 30 years, if you put money into stocks or bonds, you just rode the wave ofdeclining interest rates and made money,” Leslie Teo, chief economist at thesovereign wealth fund, said in an interview yesterday ahead of the release of GIC’s annual report. “In the future, things won’t be so straightforward. Marketreturns will likely not be as high. Investors will need to be more nimble andskill-based active management may be an additional source of returns.”
The changegives GIC room to shift funds across asset classes as it adapts to challengesafter the 2008 global financial meltdown, the European debt crisis and China’sslowdown restricted investment gains. It will also allow the fund to bettermanage its portfolio amid rising bond yields as the U.S. Federal Reserveconsiders tapering stimulus with the economy recovering.
Main Metric
GIC’s 20-yearannualized real rate of return, or gains on top of global inflation that ituses as its main metric, was 4 percent as of March 31, up from 3.9 percent theprevious year, it said in its annual report today. The MSCI World Index gained 9.3 percent during GIC’s fiscal year.
“Through thenew strategy, we are not aiming for higher risk in our overall investmentprocess,” Chief Investment Officer Lim Chow Kiat said in the interview. “We arejust clarifying which returns stem from the market and which are based anparticular investment skills.”
GIC’s focus remains on long-term investment results, he said.
The annualized nominal rateof return in U.S. dollar terms over 20 years was 6.5 percent, underperforminga portfolio GIC had created as a benchmark with 65 percent of holdings instocks and 35 percent in cash, it said. Over the past decade, its 8.8 percentreturn beat the portfolio’s 8.6 percent gain as it increased its investments instocks, it said.
Five-Year Return
The five-yearreturn was 2.6 percent, compared with a 3.4 percent gain in the portfolio, itsaid. The fund, which is owned by the government, doesn’t release yearly returnfigures or the size of its assets under management.
GIC is rankedthe world’s eighth-biggest state fund by the Roseville, California-basedSovereign Wealth Institute, which valued its portfolio at $248 billion. TemasekHoldings Pte, Singapore’s state-owned investment company that’s operatedseparately from GIC, said last month its assets rose 8.6 percent to a recordS$215 billion ($169 billion) in the year ended March 31.
Norway’sGovernment Pension Fund Global, the world’s biggest, posted a return of 13.4 percent in 2012, the second best in its history, the Oslo-based investor said in March.
More Stocks
Equities at GIC increased to 46 percent in the year ended March from 45 percent a yearearlier, it said in the annual report. Bonds rose to 21 percent from 17 percentand it reduced cash holdings to 7 percent from 11 percent a year earlier, itsaid. Alternative assets, consisting mainly of real estate, private equity andcommodities, declined to 26 percent from 27 percent.
CitigroupInc. (C) and UBS AG (UBSN), GIC’s two biggest holdings, helped returns.Citigroup increased 21 percent and UBS climbed 15 percent during the fund’sfiscal year. The banks, which GIC bought during the global financial crisis,remain long-term investments, Lim said.
"The financial sector in the West has been healing from the damage of the crisis,with banks building up capital and reporting better profits," he said."UBS and Citi have benefited from that healing process."
GIC’sholdings in Europe declined to 25 percent of its portfolio, down one percentagepoint from the previous year, according to the report. Those in the U.K. fellto 8 percent from 9 percent, while investments in the euro area were unchangedat 11 percent.
Assets in theAmericas rose as the U.S. increased to 36 percent of GIC’s portfolio from 33percent a year earlier. Those in Asia fell to 28 percent from 29 percent asJapan made up 10 percent of the portfolio from 12 percent, it said.
GIC doesn’texpect the Fed to raise interest rates by 200 basis points to 300 basis pointsin the year or two, Lim said.
“The world still needs a clear reminder that global economies have not fully recoveredfrom the global financial crisis,” Lim said. “The U.S. central bank’s effect isfar and wide, especially for economies and companies that depend on foreign liquidity.”
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