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GIC rate of return outpaces inflation
Singapore's sovereign wealth fund warns of challenging investment environment ahead
Tom King 27 Jul 2022

Singapore’s sovereign wealth fund GIC says its portfolio achieved an annualized nominal rate of return of 7.0% in US dollar terms over a 20-year period that ended on March 31 2022.

After accounting for global inflation, the annualized real rate of return stood at 4.2% over the period, according to the fund’s latest annual report.

This means that over the past 20 years, from April 2002 to March 2022, GIC has achieved an average annual return of 4.2%, over and above the global inflation rate. The rolling 20-year real rate of return is the primary metric for evaluating GIC’s investment performance.

Looking ahead, the wealth fund says it is now facing a rapidly shifting investment landscape with uncertainties emerging on several fronts as geopolitical tensions continue to rise. Also, the macroeconomic environment has entered a high-inflation regime, driven by supply chain disruptions, a rapid recovery in demand, and rising wages.

Given these concerns, GIC says it has doubled down on its core investment principles to diversify its portfolio and take the long view.

Chief executive officer Lim Chow Kiat comments: “The investment landscape is shifting rapidly. Years of concerns over deflation have turned into worries of elevated inflation, forcing economic policymakers to reverse stimulus policies. At the same time, the clock for the climate crisis is ticking, pandemic risk lingers on, and geopolitical conflicts and domestic political schisms are growing. GIC will continue to adapt to these changing realities while remaining anchored to our mandate, values, and investment principles.”

The fund has formed a dedicated sustainability office, with the aim of deepening research into key sustainability issues and integrating sustainability into the fund’s investment and corporate practices.

The creation of the new unit will support the global transition to net zero in the real economy, and is in addition to the fund’s growing investments in new technology, and engagement with its portfolio companies to support their decarbonization and transition efforts, GIC says.

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