CIO of Singapore’s GIC sees added scope for opportunistic investments, alternatives

The chief investment officer of Singapore sovereign wealth fund GIC Private Ltd. suggested Wednesday the current low-yield outlook for traditional bond and equity investments has left the GIC taking a more tactical, opportunistic approach in managing its portfolio. He also suggested the GIC might add to its alternative investments.

Speaking at the Investment Management Association of Singapore's annual conference, Lim Chow Kiat, GIC's group CIO, said in the current environment expectations for the rewards of “simply holding diversified assets and waiting” have to be lowered.

Instead, “you have to work harder in terms of positioning for cycles; you have to work harder in terms of identifying assets which have (the) highest value gap; you have to work harder in terms of taking advantage of dislocations,” Mr. Lim said.

And that's where alternatives managers, with niche expertise, come in, said Mr. Lim, who noted GIC has been investing in real estate and private equity for 25 to 30 years now, and more recently in hedge funds and infrastructure.

“We continue to like these asset classes, not so much … to chase alpha because the beta prospects are not good, but because the prospects in these alternative asset classes are still looking promising to us,” Mr. Lim said.

Mr. Lim said GIC believes there are many alternatives managers with the “niche expertise” needed to deliver solid returns in the current market environment, and “if we can find these managers, we are very prepared to allocate more capital to them.”

For GIC's fiscal year ended March 31, 2013, the sovereign wealth fund's combined allocations to alternatives slipped one percentage point from the year before to 26% of the total portfolio.

Over that 12-month period, allocations held steady for real estate, 10%; private equity and infrastructure, 11%; and hedge funds, 3%; while allocations to natural resource strategies dropped to 2% from 3%.

Allocations to nominal bonds, meanwhile, jumped 4 percentage points to 19%. Allocations to publicly listed equities edged up 1 point to 46%.

Allocations to inflation-linked bonds held steady at 2%, while cash claimed 7%, down from 11%.

Asked what he thought about exchange-traded funds, Mr. Lim called them a “legitimate investment vehicle,” but said the GIC didn't use them except in a few “very niche areas.”

“I guess, given our size, we have been able to find or build lower cost vehicles for the same kind of exposures,” Mr. Lim explained.

GIC, launched in 1981 to invest part of Singapore's foreign-exchange reserves, has for many years restricted official comment on the size of its portfolio to saying it exceeds US$100 billion. By some estimates, its portfolio currently ranges between US$250 billion and US$300 billion.