--Singapore's sovereign wealth fund GIC reduces exposure in
developed markets
--Singapore's GIC reduces holdings in equities and bonds,
accumulates cash
--Singapore's GIC expects low investment returns till global
economy returns to balanced and sustainable growth
The Government of Singapore Investment Corp. has reduced its
exposure in developed markets and cut its holdings in equities and
bonds, as global uncertainties continue to weigh on the
sovereign-wealth fund's investment strategy.
GIC, which manages Singapore's foreign-exchange reserves, said
Tuesday in its annual report for the fiscal year ended March 31
that it now has increased cash in its portfolio and that it expects
investment returns to be low till the global economy returns to
"balanced and sustainable growth."
While the allocation to cash for the year-ended March rose to
11% from 3% last year, GIC's exposure to public equities fell to
45% from 49%. Allocation to bonds dropped to 15% from 20% last year
as bond yields in the developed markets were pushed down to
"abnormally" low levels by the flight to safe asset and central
bank intervention.
"Due to the heightened uncertainty in global markets, we allowed
the cash inflow from investment income and fund injection to
accumulate during the year in preparation for better investment
opportunities," GIC Group Chief Investment Officer Ng Kok Song said
in the report.
GIC describes itself as a long-term investor and doesn't provide
the absolute dollar amount of its investment or portfolio.
The fund, which, according to analysts, manages a portfolio of
about US$300 billion, and has some high-profile investments in
global financial institutions such as Citigroup Inc. and UBS AG,
said that its exposure to developed equities market dropped to 30%
from 34%, while that of emerging markets it remained unchanged at
15%.
The fund's exposure in terms of geographical region showed that
total investment in the American's remained unchanged at 42% in the
year ending March. Of this, exposure to the U.S. accounted for 33%,
unchanged from last year.
However, exposure to Europe dropped to 26% from the earlier 28%,
Asia share continued to grow and accounted for 29% from 27%.
Mr. Ng said that within Europe, GIC's exposure to Portugal,
Ireland, Italy, Greece and Spain was 1.4% as of March 31 and it had
largely invested in the real estate and selected equities in Italy
and Spain.
"Looking ahead, we assess that the investment environment will
be characterised by a global economy struggling to return to
sustainable growth," he said.
The annual report said that the annualized real rate of return
from its investment for the 20 years through March, in excess of
global inflation, was 3.9% in U.S. dollar terms, unchanged from a
year earlier.
For the five years ended in March, GIC said the annualized
return in U.S. dollar terms was 3.4%, while it was 7.6% for the
10-year period.
"For a large portfolio to earn returns above inflation over a
long investment horizon, it must have significant exposure to
equity and equity-like assets. The key risks to the portfolio are
thus political and economic developments which impact equity
returns," said Mr. Ng.
Write to P.R. Venkat at venkat.pr@dowjones.com
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