Singaporean sovereign wealth fund GIC posted an annualised 20-year inflation-adjusted return of 4.3% for the period to 31 March 2021, bouncing back from last year’s 2.7%.

This is GIC’s highest annualised real return since 2015, and reflects the rebound in global equity markets following their slump in March 2020. 

Diego Lopez

The sovereign wealth fund emphasises its longterm focus and does not disclose single-year returns, but according to data platform Global SWF, GIC's single-year return from April 1, 2020 to March 31, 2021 was 37.5%.

"That is an absolutely stunning return, and much higher than other funds closing year in March," said Diego Lopez, managing director of Global SWF.

By comparison, Singapore’s Temasek, Japan’s GPIF, Canada’s CPP, and the New York Common Retirement Fund posted annual returns of 24.5%, 25.2%, 20.4% and 33.6%, respectively.

"Only this rate could move the 5-, 10- and 20-year returns from 3.9%, 5.2%, and 4.6% in FY20 to 8.8%, 6.2%, and 6.8%  in FY21," Lopez explained.

The results bring Global SWF's estimates of GIC's assets under management from $550 billion to $744 billion, and move it from 9th to 4th in their ranking of the world's largest sovereign investors. Only the Government Pension Fund of Norway, China Investment Corporation, and the State Administration of Foreign Exchange of the People's Republic of China are larger than GIC under the latest estimates.

According to Javier Capapé, director of sovereign wealth research at the IE Center for the Governance of Change in Spain, GIC benefitted from its exposure to technologies of the future, such as e-commerce and teleworking. The figure also reflects market sentiment: "March 2020 represented the lowest stock value of many companies. A year later, many risks and uncertainties are still present, yet most of the countries have learnt how to live now with the virus," he told AsianInvestor.

However, the sovereign wealth fund remains cautious on its macroeconomic outlook. “We anticipate a differentiated global economic recovery across countries and sectors, with a wide range of potential outcomes over the medium and long term,” chief executive officer Lim Chow Kiat said in the annual report’s accompanying letter.

THE LONG GAME

GIC continued to push forward with diversification efforts last year, raising its exposure to real estate, private equity, and emerging market equities, while reducing its cash and nominal bond holdings.

As of March 2021, GIC had 15% of assets in private equity, up from 13% a year earlier, and 8% invested in real estate, up from 7%. Nominal bonds and cash fell to 39% from 44%, while emerging market equities increased from 15% to 17%. Developed market equities and inflation-linked bonds remained unchanged vis-à-vis last year, at 15% and 6% respectively.

Asset mix of GIC portfolio. Source: GIC 2020/2021 report

“The share of private equity and real estate increased due to robust deal activity and strong asset performance over FY2020/21,” read the report.

Indeed, GIC’s strong dealmaking led Global SWF to name it the world’s most active state investor in 2020. According to Global SWF, GIC deployed $17.7 billion across 65 deals last year.

Geographically, the fund increased its exposure to Asia (ex-Japan) from 20% to 26% while reducing its exposure to the US from 36% to 34% and Japan from 14% to 8%.

The increasing exposure to Asia "reflects the activity of GIC in Asian venture capital, technology and also real estate, including not only China but also Indonesia, India, Vietnam and Malaysia," Lopez said.

Capapé believes this reflects GIC's long term vision. "Asia, and particularly India and China, are relevant in the long investment horizons of GIC. It goes from developing data centres in Japan to industrial companies in Hong Kong," said Capapé.

GIC currently counts nine overseas offices – the most of any global asset owner after Temasek, which operates 12 offices across eight countries. In June, GIC announced plans to set up its first Australia office.

As the fund marks its 40th anniversary, it highlights technological transformation, sustainability, and geopolitics as three trends it expects to drive markets and open up new areas of growth in the months ahead.