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Singapore’s GIC posts lowest 20-year return since 2009, warns of "more challenging" outlook

GIC says the dip in the real rate of return was largely due to “tremendous returns” during the tech bubble in the late-1990s to 2000 that dropped out of the 20-year window
By Goh Thean Eu  
July 29, 2020

Singapore sovereign wealth fund GIC Pte Ltd reported its lowest long-term annualised return in 20 years and warned that possible new waves of coronavirus infections and rising political tensions make for a “more challenging” global investment outlook.

GIC’s 20-year annualised real rate of return for its financial year ended March 31, 2020 was 2.7%, the wealth fund says in a statement posted on its website on July 28.

That was down from 3.4% in 2019 and the lowest since the 2.6% in 2009 in the midst of the global financial crisis, according to figures from its past annual reports.

GIC typically only publishes the 20-year return and doesn’t publicly the disclose one-year number.

Chief Executive Officer Lim Chow Kiat blamed the decline on the fact that strong returns from the 1999/2000 dot-com bubble dropped out of the 20-year window.

He warned that the investment outlook with a “wide range of potential outcomes and downside risks, has become even more challenging”.

“In addition to the pandemic unknowns, such as the possibility of subsequent waves of infections, other pre-existing problems have been accentuated. These include fundamental issues such as poor productivity growth, weakened social compacts, high debt burden, and rising geopolitical tensions,” he says in the statement.

According to Mr. Lim, GIC had already been trimming its portfolio risk exposure because of concerns about “high uncertainty and high valuation” in recent years.

“While we had not expected a pandemic to be the catalyst for this global downturn, our efforts to diversify and reduce our portfolio risk have enabled us to cushion its impact and better navigate the market turmoil brought by Covid-19,” he says.

In the last financial year, GIC cut exposure to both developed and emerging-market stocks to 15%, from 19% and 18%, respectively, in 2019.

At the same time, it raised exposure to nominal bonds and cash to 44% from 39%, private equity to 13% from 12%, and inflation-linked bonds to 6% from 5%.

The majority, or 34%, of its investments, were in the US, up from 32% in 2019. Its second largest geographical exposure was in Asia ex-Japan, which was trimmed to 19% from 20% previously.

Japan’s share was up to 13% from 12%, the same as for the eurozone.

GIC does not publicly disclose its assets data. According to the Sovereign Wealth Centre, the fund had US$510 billion of assets under management as of end-March 2019.