Singapore sovereign wealth fund GIC Private Ltd.'s latest annual report, released Wednesday, painted an increasingly pessimistic picture of the global economic and market outlook, even as the fund's most recent performance benchmark — for annualized returns over the rolling 20-year period through March 2019 — held steady from the year before at 3.4%.
The recent shift by major central banks to more accommodative policies may limit downside risks but should do little at this point to spur solid growth, the report said.
"We are observing high risk asset valuations that mask weak market fundamentals and growing economic uncertainties," wrote Lim Chow Kiat, GIC's CEO.
Should policy uncertainty lead to a deeper economic slowdown, meanwhile, "major markets such as Europe and Japan would have little policy ammunition to respond and are therefore likely to experience a more protracted downturn," he said.
GIC's latest asset allocation figures show the sovereign wealth fund now playing defense.
The fund's 39% allocation to bonds and cash — up from 37% the year before and 35% as of March 2017 — stands 9 percentage points above the top of GIC's 25% to 30% target range for that asset segment, while its 19% allocation to developed market equities — down from 23% the year before and 27% as of March 2017 — has dropped below its 20% to 30% range.
In an email, a GIC spokesman said the fund's rising allocations to bonds and cash reflect its concerns about "stretched valuations amid heightened uncertainty," justifying a shift towards a slightly more conservative portfolio mix.