SINGAPORE: Singapore sovereign wealth fund GIC on Friday (Jul 25) reported a dip in its returns to the lowest in five years and reiterated a warning on volatile returns ahead amid “a world in flux”.
To this end, the state investor will continue to build a resilient portfolio by focusing on long-term value and going beyond diversification to “prioritise granularity and agility” in its investment strategies.
In its 2024/25 annual report, GIC said its 20-year annualised real rate of return came in at 3.8 per cent for the year ended Mar 31. This marked a dip from 3.9 per cent a year ago, and the lowest since its 2.7 per cent return in FY2019/20.
The 20-year metric – a key indicator of GIC’s investment performance – is a rolling return, meaning each year the calculation window shifts forward by one year, dropping the earliest year and adding the most recent.
For instance, the figure for FY2024/25 represented the average annual return of GIC’s portfolio between April 2005 and March 2025, while taking global inflation into account.
In nominal US dollar terms, it reported an annualised return of 5.7 per cent for the 20-year period ended Mar 31 2025.
CEO Lim Chow Kiat said GIC’s long-term returns “remained stable”, although a confluence of factors has affected its performance in recent years.
These include cyclical shifts in growth, inflation and interest rates, as well as longer-term structural shifts such as demographic changes and the reconfiguration of supply chains.
There are also foundational shifts that herald “fundamental transformations to the world order” to contend with. These include climate change, artificial intelligence (AI), great power conflict and heightened protectionism.
“The world is in flux,” said GIC’s group chief investment officer Bryan Yeo. “There are many forces in the world today driving unprecedented uncertainty that’s intensifying, and the truth is, it’s harder to prepare for.”
This means that returns over the next decade will be “more volatile”.
“We expect wider dispersion across different markets and even within asset classes. This means that the compensation for taking additional market risk … will likely be lower given higher starting valuations,” Mr Yeo, who took over the role as group chief investment officer in April, told reporters at a briefing held a day before the release of the report.
In response, GIC said it is adopting granularity and agility into its investment strategies, as “diversification alone is no longer enough”.
Granularity means being precise and instead of targeting entire industries, it aims to identify “investible segments” within growing themes or sectors.
Citing the global energy sector as an example, Mr Yeo said while attractive opportunities can be found in the areas of electrification and energy efficiency, there are fragmented trends across different regions which will require a “nuanced approach” in investments.
“For example, natural gas will continue to play a key role in the United States over the medium term, but renewables remain well positioned in Europe, China and India,” he added.
GIC needs to stay agile as well by maintaining a good liquidity position so that it can “act in a contrarian manner whenever there are opportunities and dislocations that emerge”, said Mr Yeo.
Contribution from the reserves, or the Net Investment Returns Contribution (NIRC), is one of the major contributors to Singapore's yearly government budget.
Under the NIRC framework, the government can spend up to 50 per cent of the net investment returns on net assets invested by GIC, the Monetary Authority of Singapore and Temasek, as well as up to 50 per cent of the net investment income derived from past reserves from the remaining assets.
At the end of the last financial year, more than half of GIC’s investment portfolio was in equities. This marked a five-percentage-point increase from 46 per cent a year ago, largely due to an increase in investments in the US.
Allocations to real assets inched up by one percentage point to 23 per cent, while that of fixed income was cut to 26 per cent from 32 per cent.
The Americas accounted for the largest share of the portfolio at 49 per cent, up from 44 per cent a year ago. This includes Canada and Latin America, although the US markets would make up the biggest portion of investments in this region.
Around 24 per cent of its portfolio was in Asia Pacific, a drop from 28 per cent, while its exposure to global markets dipped by one percentage point to 7 per cent.
The share of Europe, Middle East and Africa remained unchanged at 20 per cent.
Asked why its exposure to Asia has fallen, GIC reiterated that it does not allocate assets by geography, and the distribution reflects where it has found more opportunities over the year.
“The final exposure really reflects on both risk and return,” said Mr Lim, adding that with its size, Asia “is a mixed bag”.
When it comes to the US – its largest market in terms of capital deployment – GIC still sees “lots of bottom-up opportunities” in the vast market.
Asked if the tariffs announced by US President Donald Trump may change its investment plans, Mr Lim said the impact of tariffs will depend on sectors and the circumstance of individual companies.
Some companies might end up with a competitive advantage, especially if they are domestic players up against foreign competitors which will bear the brunt of higher levies.
GIC’s representatives added that while tariffs are a key consideration, it also looks at other variables such as a company’s ability to innovate amid technological shifts.
For a long-term investor like GIC, innovation is a key characteristic that it seeks in companies and the US is one market “where there is very strong innovation”, said Mr Yeo.
Neither is it too worried about the weakness in the US dollar, as GIC's portfolio is well-diversified.
In addition, many US firms are large multinational corporates that derive a good part of their revenues overseas. Currency translation effects can help to mitigate the impact of a weak US dollar scenario if that plays out, Mr Yeo said.
AI, which GIC described as a “multi-decade” structural shift with a huge impact on the world, is also on the sovereign wealth fund’s radar.
There are “unparalleled investment opportunities” with the proliferation of AI use cases, but it will remain disciplined and focused on long-term value, said Mr Yeo.
“We avoid short-term hype and over-valuations by focusing on companies with key characteristics,” he said, citing attributes such as having differentiated technologies and sound business models.
In recent years, its investments into the AI sphere include data centre firm Equinix, data and AI governance platform Atlan and data company Databricks.
As it watches out for the disruption brought on by AI, divestments could also be possible, but it remains “too early” to predict where value will be destroyed, said Mr Yeo.
Beyond investments, GIC is also incorporating AI into its operations.
Following the establishment of an AI Council in early 2023, GIC said it is further building its AI capabilities to enhance its investment decision-making and operational efficiency.
For example, it has been experimenting with a “virtual investment committee member” which is an AI-powered tool for its investment teams to upload their investment memos and receive an analysis report on deal terms and information in an hour or so.
Besides efficiency, the report generated also highlights areas to focus on and raises questions for its investment teams.
The experimental platform, which taps on GIC’s in-house data, has been piloted in the real estate and the fixed income investment teams for about a year now.
The trial's feedback has been “positive”, with the platform asking useful questions that have made its “deals teams and the investment committee think a bit harder”, said Mr Yeo.
With that, GIC is looking to build a version 2.0 with varied personas, like a bull or bear advocate, to spark more robust discussions within its teams.
Still, GIC’s representatives stressed that the prototype remains “an experiment” for now, as there is the need to be careful of potential risks such as hallucination, which occur when large language models generate false information.
“We certainly see a lot of promise or potential to develop it further, but you just cannot take everything that comes out of it to be accurate,” said Mr Lim. “So, we have to approach it with that caution.”
Continue reading...
To this end, the state investor will continue to build a resilient portfolio by focusing on long-term value and going beyond diversification to “prioritise granularity and agility” in its investment strategies.
In its 2024/25 annual report, GIC said its 20-year annualised real rate of return came in at 3.8 per cent for the year ended Mar 31. This marked a dip from 3.9 per cent a year ago, and the lowest since its 2.7 per cent return in FY2019/20.
The 20-year metric – a key indicator of GIC’s investment performance – is a rolling return, meaning each year the calculation window shifts forward by one year, dropping the earliest year and adding the most recent.
For instance, the figure for FY2024/25 represented the average annual return of GIC’s portfolio between April 2005 and March 2025, while taking global inflation into account.
In nominal US dollar terms, it reported an annualised return of 5.7 per cent for the 20-year period ended Mar 31 2025.
CEO Lim Chow Kiat said GIC’s long-term returns “remained stable”, although a confluence of factors has affected its performance in recent years.
These include cyclical shifts in growth, inflation and interest rates, as well as longer-term structural shifts such as demographic changes and the reconfiguration of supply chains.
There are also foundational shifts that herald “fundamental transformations to the world order” to contend with. These include climate change, artificial intelligence (AI), great power conflict and heightened protectionism.
“The world is in flux,” said GIC’s group chief investment officer Bryan Yeo. “There are many forces in the world today driving unprecedented uncertainty that’s intensifying, and the truth is, it’s harder to prepare for.”
This means that returns over the next decade will be “more volatile”.
“We expect wider dispersion across different markets and even within asset classes. This means that the compensation for taking additional market risk … will likely be lower given higher starting valuations,” Mr Yeo, who took over the role as group chief investment officer in April, told reporters at a briefing held a day before the release of the report.
In response, GIC said it is adopting granularity and agility into its investment strategies, as “diversification alone is no longer enough”.
Granularity means being precise and instead of targeting entire industries, it aims to identify “investible segments” within growing themes or sectors.
Citing the global energy sector as an example, Mr Yeo said while attractive opportunities can be found in the areas of electrification and energy efficiency, there are fragmented trends across different regions which will require a “nuanced approach” in investments.
“For example, natural gas will continue to play a key role in the United States over the medium term, but renewables remain well positioned in Europe, China and India,” he added.
GIC needs to stay agile as well by maintaining a good liquidity position so that it can “act in a contrarian manner whenever there are opportunities and dislocations that emerge”, said Mr Yeo.
Contribution from the reserves, or the Net Investment Returns Contribution (NIRC), is one of the major contributors to Singapore's yearly government budget.
Under the NIRC framework, the government can spend up to 50 per cent of the net investment returns on net assets invested by GIC, the Monetary Authority of Singapore and Temasek, as well as up to 50 per cent of the net investment income derived from past reserves from the remaining assets.
STILL SEE OPPORTUNITIES IN THE US
At the end of the last financial year, more than half of GIC’s investment portfolio was in equities. This marked a five-percentage-point increase from 46 per cent a year ago, largely due to an increase in investments in the US.
Allocations to real assets inched up by one percentage point to 23 per cent, while that of fixed income was cut to 26 per cent from 32 per cent.
The Americas accounted for the largest share of the portfolio at 49 per cent, up from 44 per cent a year ago. This includes Canada and Latin America, although the US markets would make up the biggest portion of investments in this region.
Around 24 per cent of its portfolio was in Asia Pacific, a drop from 28 per cent, while its exposure to global markets dipped by one percentage point to 7 per cent.
The share of Europe, Middle East and Africa remained unchanged at 20 per cent.
Asked why its exposure to Asia has fallen, GIC reiterated that it does not allocate assets by geography, and the distribution reflects where it has found more opportunities over the year.
“The final exposure really reflects on both risk and return,” said Mr Lim, adding that with its size, Asia “is a mixed bag”.
Related:
When it comes to the US – its largest market in terms of capital deployment – GIC still sees “lots of bottom-up opportunities” in the vast market.
Asked if the tariffs announced by US President Donald Trump may change its investment plans, Mr Lim said the impact of tariffs will depend on sectors and the circumstance of individual companies.
Some companies might end up with a competitive advantage, especially if they are domestic players up against foreign competitors which will bear the brunt of higher levies.
GIC’s representatives added that while tariffs are a key consideration, it also looks at other variables such as a company’s ability to innovate amid technological shifts.
For a long-term investor like GIC, innovation is a key characteristic that it seeks in companies and the US is one market “where there is very strong innovation”, said Mr Yeo.
Neither is it too worried about the weakness in the US dollar, as GIC's portfolio is well-diversified.
In addition, many US firms are large multinational corporates that derive a good part of their revenues overseas. Currency translation effects can help to mitigate the impact of a weak US dollar scenario if that plays out, Mr Yeo said.
TAPPING AI FOR GROWTH
AI, which GIC described as a “multi-decade” structural shift with a huge impact on the world, is also on the sovereign wealth fund’s radar.
There are “unparalleled investment opportunities” with the proliferation of AI use cases, but it will remain disciplined and focused on long-term value, said Mr Yeo.
“We avoid short-term hype and over-valuations by focusing on companies with key characteristics,” he said, citing attributes such as having differentiated technologies and sound business models.
In recent years, its investments into the AI sphere include data centre firm Equinix, data and AI governance platform Atlan and data company Databricks.
As it watches out for the disruption brought on by AI, divestments could also be possible, but it remains “too early” to predict where value will be destroyed, said Mr Yeo.
Related:
Beyond investments, GIC is also incorporating AI into its operations.
Following the establishment of an AI Council in early 2023, GIC said it is further building its AI capabilities to enhance its investment decision-making and operational efficiency.
For example, it has been experimenting with a “virtual investment committee member” which is an AI-powered tool for its investment teams to upload their investment memos and receive an analysis report on deal terms and information in an hour or so.
Besides efficiency, the report generated also highlights areas to focus on and raises questions for its investment teams.
The experimental platform, which taps on GIC’s in-house data, has been piloted in the real estate and the fixed income investment teams for about a year now.
The trial's feedback has been “positive”, with the platform asking useful questions that have made its “deals teams and the investment committee think a bit harder”, said Mr Yeo.
With that, GIC is looking to build a version 2.0 with varied personas, like a bull or bear advocate, to spark more robust discussions within its teams.
Still, GIC’s representatives stressed that the prototype remains “an experiment” for now, as there is the need to be careful of potential risks such as hallucination, which occur when large language models generate false information.
“We certainly see a lot of promise or potential to develop it further, but you just cannot take everything that comes out of it to be accurate,” said Mr Lim. “So, we have to approach it with that caution.”
Continue reading...