SINGAPORE Government of Singapore Investment Corp., which manages a sovereign wealth fund with more than $100 billion in assets, plans to increase its emerging markets exposure, possibly through private equity funds, confirmed spokeswoman Jennifer Lewis.
An annual report issued by the fund Sept. 23 said 10% of assets were in emerging market equities as of March 31. A target allocation for emerging markets was not available, according to Ms. Lewis.
Overall, the fund had 44% in listed equities, 26% in bonds, 23% in alternative assets and 7% in cash. Of the alternatives portfolio, real estate accounted for 10 percentage points, with eight percentage points in private equity, three percentage points in hedge funds and two percentage points in natural resources, according to the Report on the Management of the Governments Portfolio for the Year 2007/08.
The portfolio is still substantially invested in the developed economies, Ng Kok Song, group chief investment officer, wrote in the report. However, in the last 10 years, we have increased our investments in the Asian region and also in many emerging economies.
The fund recorded a 5.8% annualized rate of return for the past 20 years in U.S. dollar terms, according to the report. Accounting for global inflation, the fund returned an annualized 4.5% over the same period. The return for the year ended March 31 was not available, Ms. Lewis said. Overall, about one-third of the fund is managed externally, according to the report. It was not known if the fund will search for new managers as a result of the planned increase in emerging markets equities.
Looking ahead, we see a more challenging investment environment than what we have experienced since GICs formation in 1981, said Mr. Ng. The powerful trend of disinflation that propelled the global capital markets over 25 years seems to have ended.
There are positive countervailing forces such as rising productivity and the potentially large domestic demand from the emerging economies, particularly China, India, Brazil and Russia.
With the release of this document, it is hoped that the global community will also appreciate the context and circumstances in which GIC operates, and be assured that GIC has and will always invest for only one purpose to achieve sustainable financial returns for the governments assets, Tony Tan Keng Yam, GICs deputy chairman and executive director, said at a media conference, according to Ms. Lewis.