The Government of Singapore Investment Corp. (GIC), which manages over $100 billion of the city-state’s reserves, has increased its exposure to emerging markets, while acknowledging that the investment outlook remains challenging.
The sovereign wealth fund had shifted a further five per cent of its assets into emerging market equities from developed market equities, its annual report stated, with increased exposure to Asia and Latin America and a withdrawal from Europe and the US.
Further, with the recovery of equity markets, GIC’s 20-year annualised real rate of return for 2010-11 grew to 3.9 per cent, compared to 3.8 per cent a year earlier.
GIC, established in 1981, is the world’s eighth-largest sovereign wealth fund, with $247.5 billion in assets, according to the Sovereign Wealth Fund Institute. GIC, however, does not disclose the size of its assets or investments.
“Although the global financial crisis is now behind us, we still face challenges in the economic and investment environment. The sustainable recovery of the developed economies remains uncertain, while the emerging economies face challenges in restraining inflationary pressure and currency appreciation,” group chief investment officer, Ng Kok Song, said in a statement.
With the US and Europe still recovering from the crisis, “their longer term outlook is still uncertain and carries considerable macro financial and economic risks,” Ng wrote in the annual report.
Despite the challenges in the emerging economies, he added, GIC had further increased “investments on the strength of their potentially higher returns and improved macroeconomic fundamentals.”
More From This Section
GIC’s diversified portfolio of investments spans public markets, real estate, private equity and the infrastructure sector, with interests in 40 countries. It has invested in Citigroup, UBS, Kohlberg Kravis Roberts & Co, The Blackstone Group and in India’s Edelweiss and the Infrastructure Development Finance Company.
About 42 per cent of the fund’s investments remained in America, down from 43 per cent in the previous year, and around 28 per cent in Europe, two per cent lower than 2009-10, according to the annual report. Last year, its portfolio in Asia grew from 24 per cent to 27 per cent, underscoring the shift in emphasis.
The adjustment in GIC’s investment focus also reflects recent changes in the fund’s top management. Last month, it announced the appointment of new heads for its China, Latin America and India business groups, to strengthen its “reach in the emerging markets”.
In a separate development, Tony Tan, who led the fund as deputy chairman and executive director since 2005, resigned from the GIC board late last month, and is a candidate in Singapore’s coming presidential election.