GIC posts its best rate of return since 2015

Written by Kapronasia || August 02 2023

Singaporean sovereign wealth fund GIC's annualized 20-year real rate of return - its main performance gauge - for the year ended March 2023 was 4.6% after accounting for inflation, the highest since 2015 and up from 4.2% a year earlier. GIC has a diversified portfolio of which certain Chinese investments are a big part, including Alibaba and Ant Group. The diversity of the portfolio likely helped GIC insulate its performance from the 2022 market correction.

GIC, which owns stakes in some of the world’s biggest banks, including Citigroup and UBS Group, but does not disclose its assets under management, tends to take a long-term view of its investments. That said, the U.S.-based Sovereign Wealth Fund Institute estimates that GIC manages about $690 billion in assets and is the world’s seventh biggest by total assets,

One of the most intriguing aspects of GIC’s portfolio is its China exposure. Since they established diplomatic ties in 1990, China and Singapore have enjoyed a close relationship, with the city-state being a major investor in flagship infrastructure projects in China during its many years of fast economic growth. In more recent years, Chinese companies and individuals have both flocking to Singapore, with the former establishing regional headquarters and the later buying property, setting up family offices and in some cases immigrating.

That said, GIC is closely watching China’s foreign investment environment, which has become more challenging in the past five years amid geopolitical tensions and the pandemic. With that in mind, it is no surprise that GIC group chief investment officer Jeffrey Jaensubhakij told Reuters GIC was interested in investing in Chinese companies that focus on domestic business rather than exporting to the United States. Such “China for China type of investments still make sense,” he said.

That said, GIC is also diversifying its portfolio. In an interview with Nikkei Asia, Jaensubhakij said that in response to shifts in the global supply chain, GIC has "incrementally" moved its capital to sectors and countries benefiting from them: Mexico, India, Indonesia and Vietnam. In these countries, GIC sees potential to invest in logistics, real instate and the industrial sector.

As for China, the Singaporean sovereign wealth fund will continue to invest in the world’s second largest economy, but we reckon it will do so in a more targeted way, in sectors that are favored by China’s government to help the country reach certain development goals and move up on the value chain to become an advanced manufacturing powerhouse. Green technology and electric vehicles, which has GIC has identified as promising areas for investment, are likely a good bet.