Government of Singapore fund plans foray into debt market

Close on the heels of the entry of over the $170 billion US pension fund, California Public Employees Retirement (CalPERS), Indian markets may see investments coming from $100 billion Government of Singapore Investment Corporation (GIC).

According to custodian banks, the fund is holding discussions for investing primarily in the Indian debt market, government securities and treasury bills to start with.

They also added that CalPERS, which till now restricted its investments in Indian equity markets, has also evinced interest in corporate debt market in various discussions held with the foreign custodian banks.

Bankers, however, said that liquidity in the corporate debt market is posing a great difficulty for investment. When liquidity dries up, the investors will be required to hold the papers to maturity. This is not what an investment fund does.

Senior bankers are, however, hopeful that a committee set up by the Reserve Bank of India to set out a roadmap for the corporate debt market will address the problem.

GIC was established in 1981 to manage Singapore's foreign reserves. With a network of six overseas offices in key financial capitals around the world, GIC invests internationally in equities, fixed income, money market instruments, real estate and special investments.

The fixed income department (FI) manages GIC's global fixed income investments. Most of the returns on fixed income investments come from recurring income, enabling more stable returns and reducing the volatility of portfolio returns.

The fixed income arm has five investment teams diversified across regions and product groups: North America, Asia-Pacific, Europe, global credit and global emerging markets. Portfolio managers manage global portfolios covering multiple sectors and regions of the fixed income universe.

The foreign exchange department manages GIC's global currency exposure. In effect, it performs GIC's corporate treasury functions which include currency rebalancing, liquidity and cash flow management.

Major funds managed by the GIC include AIG Asian Infrastructure, Funds China International Capital Corporation (CICC), Technopreneurship Investment Fund (TIF).

CalPERS has recently invested about $100 million in the Indian equity market and about $5-10 million in private equity. These investments are in sectors such as Indian pharma, information technology and manufacturing spanning over a longer term horizon of 10 years.