Singapore's GIC posted a 4.6% annualized real rate of return for the 20 years ended March 31, compared with the previous year's comparable return of 4.2%.
The sovereign wealth fund does not report annual returns, nor does it make public its total assets, but data platforms estimate that it manages around $690 billion.
In its annual report released on Wednesday, CEO Lim Chow Kiat said that the fund increased liquidity in its portfolio, sought income-generating assets to protect against inflation, and moved capital to sectors and countries that benefit from the shifts in supply chains.
Mr. Lim particularly emphasized the buildup of infrastructure assets "as part of a long-term effort towards resilient returns".
In response to queries, a GIC spokeswoman said that the fund has an annual investment pace of $10 billion to $20 billion in new commitments each year, and that the fund’s infrastructure assets became a standalone strategy in 2016, which has since increased by around five times.
“We invest across six continents (i.e., all except Antarctica), and do both direct and indirect investments. Beyond private deals, we have broadened our investment focus to include infrastructure funds, opportunistic PIPE investments (i.e., listed infra equity), and infrastructure credit,” she said in written comments.
The fund’s dedicated infrastructure team has also grown from 28 people in 2005 when it was first set up to 70 people across four offices today, she added.
GIC gravitates towards infrastructure assets with high barriers to entry, regulated returns or long-term contracted revenue models because these businesses tend to generate stable, predictable and inflation-protected cash flows, the report said.
The spokeswoman did not provide specifics about how GIC’s infrastructure portfolio has performed except that it “has performed well within expectations”.
It has also provided good, risk-adjusted returns, shown resilience through economic cycles and disruptions, and provided some degree of protection against inflation, she said.
By March 31, the fund's portfolio had reduced allocation to nominal bonds and cash to 34% from 37% the year before, and developed market equities to 13% from 14%.
It increased allocation to real estate to 13% of its portfolio from 10% the year before, and to emerging market equities to 17% from 16%.
Inflation-linked bonds were kept at 6% of the portfolio, and private equity retained 17% of its asset mix.
Mr. Lim also said that investors face two new disruptions today that were less prevalent a year ago: The first, is a structural shift to a regime of higher interest rates, which are likely to be higher for longer.
"Absent another major shock to financial markets or economic growth, we have likely left behind us the world of zero interest rates. While the resulting higher prices of capital will benefit long-term investors, the transition to a higher interest rates world will be difficult for many businesses and even countries," he wrote.
The second disruption is the impact of generative artificial intelligence, including large language models, that presents potential as well as hazards. Assets related to generative AI are being repriced as financial markets digest the advent of this new technology, he said.
"AI has the potential for creative destruction and could also deliver productivity improvements that help keep inflation in check. It also naturally brings with it worries of threats to cybersecurity and societal norms," he added.
