Singapore's GIC reported on Thursday a strong rise in its long-term investment returns as of March 31, the close of its latest fiscal year, while warning the investment environment will be considerably less friendly in the future.
With an investment portfolio estimated at more than $300 billion, GIC reported its Singapore dollar returns for the 20 years ended March 31 improved to an inflation-adjusted 4.9%, up from its 4.1% tally for the two decades through March 31, 2014.
The sovereign wealth fund's latest annual report noted that extraordinary monetary policy easing following the global financial crisis has done more to boost asset prices than underlying economic conditions, leaving investors facing the prospect of “low returns over the next five to 10 years.”
While GIC's latest investment returns have been favorable, “the results underline the point that to benefit from long-term investing, we have to be prepared to tolerate short-term unrealized losses,” the report said.
For the five years ended March 31, 2014, the GIC's annualized gains for successive rolling 20-year periods — the fund's preferred span to judge long-term results — didn't move more than 0.1 percentage point for any given year. Over those five years, GIC's successive 20-year returns ranged between 3.8% and 4.1%.
The annual report's fiscal year-end snapshot of the investment portfolio suggested asset allocation changes didn't drive the improvement in the fund's long-term numbers.
As of March 31, the fund was allocating 32% of its portfolio to nominal bonds and cash, 29% to developed market equities, 18% emerging market equities, 9% private equity, 7% real estate and 5% inflation-linked bonds. That was unchanged from the prior year, except in emerging markets equities, which had been 19%, and nominal bonds and cash, which was 31%.
The fund's investments by geography were likewise fairly stable, with Asia up three percentage points at 30%, the Americas up one point to 43%, Europe down four points at 25% and Australasia steady at 2%.
Asked about the relatively strong improvement for the fund's annualized, long-term results, Lim Chow Kiat, GIC's group chief investment officer, said in an e-mail: “Broadly, the equity market has done exceptionally well, especially developed market equities,” which comprise the largest component of the GIC portfolio.
In addition, “as our returns are on a rolling 20-year basis, we also have to take into account the year that was dropped off,” as well as the year that came in, he said.
The fund, launched in 1981, doesn't report annual results or disclose the size of its portfolio.
