Singapore's Wealth Fund Opens Up, A Bit
In a step aimed at helping to address unease over the growing role of sovereign-wealth funds in world markets, Government of Singapore Investment Corp. shed more light on where it invests its money and disclosed an average annual return of 5.8% over the past two decades.
But the typically tight-lipped fund, known as GIC, continued to leave some key data under wraps. GIC also offered a note of skepticism about global markets, saying it's 'unrealistic' to expect the same rates of return in the future.
'Looking ahead, we see a more challenging investment environment than what we have seen since GIC's formation in 1981,' Chief Investment Officer Ng Kok Song said. 'The powerful trend of disinflation that propelled the global capital markets over 25 years seems to have ended.'
The disclosures offered new details on what is considered one of the world's largest investors. GIC's first public annual report shows it has shifted away from fixed-income assets in recent years to focus on equity investments and alternative classes such as private equity and real estate. Fixed-income assets now make up about one-quarter of its portfolio, GIC said, compared with three-quarters 25 years ago. At 34%, the U.S. is its largest single market for investments, with Japan second at 11%.
The fund, run since its creation by Singapore patriarch Lee Kuan Yew, manages the country's foreign reserves. GIC said investment performance benefited from growth and restrained global prices in the first 20 years of its existence. But its returns, once above 8% annually, have suffered in recent years from the Asian financial crisis of the late 1990s, the market slump earlier this decade and the recent credit crisis. It also said its returns have fallen as the firm has grown in size.
GIC's 5.8% average return for the 20 years ended March 31 is in terms of Singapore dollars. It claimed a real rate of return above inflation of 4.5% over the period. Measured in U.S. dollar terms, GIC posted a 7.8% annualized return over the period.
Going forward, Mr. Ng said, the investment landscape will be burdened by financial firms as they deleverage, as well as rising costs of food and energy. However, domestic demand may be resilient in large developing economies.
GIC said its funds exceed US$100 billion, a figure it has used for years, but declined to specify the actual amount under management. A statement from it also didn't disclose results for the most recent fiscal year, ended March 31.
It's unclear how far GIC's disclosures will go with investors and policy makers in Western countries who have expressed concern over the growing role of government-controlled funds in industries ranging from investment banks to infrastructure. GIC and other sovereign-wealth funds have come under pressure to become more transparent and make investments based solely on financial considerations.
In a foreword to Tuesday's report, GIC Deputy Chairman Tony Tan said GIC has actively participated in a group of funds that recently concluded talks to draft a code of conduct to guide their investments. He said GIC's report 'will assure the investment community and the countries in which we invest that our activities have only one purpose -- financial return.'
Also on Tuesday, Kuwait's secretive sovereign fund, the Kuwait Investment Authority, provided a rare peek into its recent performance amid the global financial crisis. The fund, estimated to have some $260 billion under management, pumped $3 billion into Citigroup Inc. and $2 billion into Merrill Lynch & Co. earlier this year.
Bader Al Saad, the KIA's managing director, told Al Arabiya TV Tuesday that the fund's paper losses on its Citi investment come to some $270 million. But the fund has long maintained its investments are long term.
Costas Paris / P.R. Venkat / John Jannarone |
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