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[TD="class: msgtxt"]Singapore's GIC shifts assets to emerging markets
By Rachel Kelly | Posted: 26 July 2011 0636 hrs
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Government of Singapore Investment Corporation (GIC)[/TD]
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<!-- END social media sharing functions -->SINGAPORE: Singapore sovereign wealth fund GIC has shifted more assets to emerging markets amid uncertainly over the recovery of the US and European economies, its annual report said Tuesday.
The Government of Singapore Investment Corporation (GIC) disclosed the shift as it reported a steady 7.2 per cent rate of return on investments in the year to March, from 7.1 per cent a year ago, on a nominal 20-year annualised basis.
GIC, which manages the republic's reserves, cautioned that global financial markets still faced significant challenges including the pace of recovery in the world's major economies from the 2008 financial crisis.
"Although the global financial crisis is now behind us, we still face challenges in the economic and investment environment," said Ng Kok Song, GIC's group chief investment officer.
"The sustainable recovery of the developed economies remains uncertain, while the emerging economies face challenges in restraining inflationary pressure and currency appreciation," he said in a statement.
For the year end March 2011, GIC ramped up its holdings in public equities in emerging economies to 15 per cent of its asset mix, up from 10 per cent previously.
However, its asset allocation to public equities in developed markets fell to 34 per cent, down from 41 per cent in the previous year.
"The main changes were the increase in exposure to Asia and Latin America and the reduction in exposure to the United States and Europe," GIC said.
"These changes largely resulted from the asset allocation shift to emerging market equities from developed market equities," it said.
But while investing in emerging economies is the direction most investors are taking for the long term on the back of strong economic growth, analysts say that diversification into developed economies remains necessary.
Associate Professor Annie Koh, Dean of the Office of Executive & Professional Education at the Financial Training Institute in SMU, said: "I think for a sovereign wealth fund, just like a pension fund you need two things, you need to make sure that you have preservation of wealth, but you need to make sure that you have incremental returns, otherwise you are not adding value.
"But there is a third variable and that deals with liquidity, so currently although they have reduced the proportion in the developed world, it is still in the 30 per cent range and that is because developed markets have depth, developed markets have liquidity.
"So much as we are unhappy with the slow growth and the issue of a debt ceiling - those are all short term issues from a very long term perspective we cannot put all our eggs into one basket. And emerging markets do not have the depth and liquidity to take all of our US$100 billion."
GIC's 20-year real rate of return in excess of global inflation was 3.9 per cent - up from 3.8 per cent the previous year.
Starting this year, GIC is also publishing the five-year and 10-year nominal rates of return.
GIC said this is to provide a sense of the on-going medium-term investment performance even while it keeps its sights on the long term.
As of March 31, the Official Foreign Reserves managed by MAS was S$295 billion, and the size of Temasek's portfolio was S$193 billion.
The five-year annualised return in US dollars was 6.3 per cent net of fees with a volatility of 12 per cent. The 10-year annualised return was 7.4 per cent with a volatility of 10 per cent.
It outpaces two composite portfolios which had 5-year annualised returns of 5.3 per cent and 4.9 per cent before fees. The two portfolios also had higher volatilities of 13.4 per cent and 15 per cent for the five years.
For the 10-year annualised return, the figures were 6.5 per cent and 6.3 per cent for the two composite portfolios with volatilities of 11.2 per cent and 12.6 per cent respectively.
Assoc Prof Koh said: "Using those data not just returns, because you could have tremendously high returns but high risk, so they give us another layer of information, volatility, so risk adjusted returns, that's the way to go, and benchmarking against two composite portfolios I thought that was brilliant."
While GIC said outside emerging economies, it is a case of choosing between three unpleasant outlooks in US, Europe and Japan.
David Cohen, Director of Asian Economic Forecasting with Action Economics, said: "Well certainly the headlines in the last month have centred on the fiscal problems in Europe and US and the Europeans seem to have taken some positive steps that will help avoid a financial crisis and I think most people still expect the US to avoid a default.
"So at the end of the day, the markets are looking for things to get back on track, but as always the surprise is the one that you are not expecting - an oil shock could disrupt the global recovery, as we saw at the beginning of the year...political turmoil in the Middle East sent the oil prices higher but they have come off somewhat."
GIC, one of two investment vehicles set up by Singapore, invests in a wide range of assets such as equities, real estate and natural resources with a 20-year horizon as the key focus.
Singapore's total foreign reserves stood at just under $240 billion in May, according to the central bank's website.
Among GIC's main investments are stakes in Citigroup, UBS as well in China Industrial Bank, China International Capital Corporation and commercial properties in major world capitals.
Unlike Temasek Holdings, the other state investment firm, GIC does not give any data on revenues or profits apart from the overall rate of return.
Earlier this month, Temasek Holdings said it earned a net profit of S$13 billion (US$10.8 billion) in the year to March from S$5 billion the previous year.
- AFP/CNA/cc/ac
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1143034/1/.html
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[TD="class: msgtxt"]Singapore's GIC shifts assets to emerging markets
By Rachel Kelly | Posted: 26 July 2011 0636 hrs
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Government of Singapore Investment Corporation (GIC)[/TD]
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<!-- END social media sharing functions -->SINGAPORE: Singapore sovereign wealth fund GIC has shifted more assets to emerging markets amid uncertainly over the recovery of the US and European economies, its annual report said Tuesday.
The Government of Singapore Investment Corporation (GIC) disclosed the shift as it reported a steady 7.2 per cent rate of return on investments in the year to March, from 7.1 per cent a year ago, on a nominal 20-year annualised basis.
GIC, which manages the republic's reserves, cautioned that global financial markets still faced significant challenges including the pace of recovery in the world's major economies from the 2008 financial crisis.
"Although the global financial crisis is now behind us, we still face challenges in the economic and investment environment," said Ng Kok Song, GIC's group chief investment officer.
"The sustainable recovery of the developed economies remains uncertain, while the emerging economies face challenges in restraining inflationary pressure and currency appreciation," he said in a statement.
For the year end March 2011, GIC ramped up its holdings in public equities in emerging economies to 15 per cent of its asset mix, up from 10 per cent previously.
However, its asset allocation to public equities in developed markets fell to 34 per cent, down from 41 per cent in the previous year.
"The main changes were the increase in exposure to Asia and Latin America and the reduction in exposure to the United States and Europe," GIC said.
"These changes largely resulted from the asset allocation shift to emerging market equities from developed market equities," it said.
But while investing in emerging economies is the direction most investors are taking for the long term on the back of strong economic growth, analysts say that diversification into developed economies remains necessary.
Associate Professor Annie Koh, Dean of the Office of Executive & Professional Education at the Financial Training Institute in SMU, said: "I think for a sovereign wealth fund, just like a pension fund you need two things, you need to make sure that you have preservation of wealth, but you need to make sure that you have incremental returns, otherwise you are not adding value.
"But there is a third variable and that deals with liquidity, so currently although they have reduced the proportion in the developed world, it is still in the 30 per cent range and that is because developed markets have depth, developed markets have liquidity.
"So much as we are unhappy with the slow growth and the issue of a debt ceiling - those are all short term issues from a very long term perspective we cannot put all our eggs into one basket. And emerging markets do not have the depth and liquidity to take all of our US$100 billion."
GIC's 20-year real rate of return in excess of global inflation was 3.9 per cent - up from 3.8 per cent the previous year.
Starting this year, GIC is also publishing the five-year and 10-year nominal rates of return.
GIC said this is to provide a sense of the on-going medium-term investment performance even while it keeps its sights on the long term.
As of March 31, the Official Foreign Reserves managed by MAS was S$295 billion, and the size of Temasek's portfolio was S$193 billion.
The five-year annualised return in US dollars was 6.3 per cent net of fees with a volatility of 12 per cent. The 10-year annualised return was 7.4 per cent with a volatility of 10 per cent.
It outpaces two composite portfolios which had 5-year annualised returns of 5.3 per cent and 4.9 per cent before fees. The two portfolios also had higher volatilities of 13.4 per cent and 15 per cent for the five years.
For the 10-year annualised return, the figures were 6.5 per cent and 6.3 per cent for the two composite portfolios with volatilities of 11.2 per cent and 12.6 per cent respectively.
Assoc Prof Koh said: "Using those data not just returns, because you could have tremendously high returns but high risk, so they give us another layer of information, volatility, so risk adjusted returns, that's the way to go, and benchmarking against two composite portfolios I thought that was brilliant."
While GIC said outside emerging economies, it is a case of choosing between three unpleasant outlooks in US, Europe and Japan.
David Cohen, Director of Asian Economic Forecasting with Action Economics, said: "Well certainly the headlines in the last month have centred on the fiscal problems in Europe and US and the Europeans seem to have taken some positive steps that will help avoid a financial crisis and I think most people still expect the US to avoid a default.
"So at the end of the day, the markets are looking for things to get back on track, but as always the surprise is the one that you are not expecting - an oil shock could disrupt the global recovery, as we saw at the beginning of the year...political turmoil in the Middle East sent the oil prices higher but they have come off somewhat."
GIC, one of two investment vehicles set up by Singapore, invests in a wide range of assets such as equities, real estate and natural resources with a 20-year horizon as the key focus.
Singapore's total foreign reserves stood at just under $240 billion in May, according to the central bank's website.
Among GIC's main investments are stakes in Citigroup, UBS as well in China Industrial Bank, China International Capital Corporation and commercial properties in major world capitals.
Unlike Temasek Holdings, the other state investment firm, GIC does not give any data on revenues or profits apart from the overall rate of return.
Earlier this month, Temasek Holdings said it earned a net profit of S$13 billion (US$10.8 billion) in the year to March from S$5 billion the previous year.
- AFP/CNA/cc/ac
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1143034/1/.html
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