GIC reports average annual real return of 4.9% over past 2 decades

SINGAPORE: Sovereign wealth fund GIC manages well over US$100 billion worth of assets in more than 40 countries globally. 

According to its latest annual report released on Thursday (Jul 30), it has generated an average annual real return of 4.9 per cent for the 20-year period ending March 31, 2015. This marks an increase from the 4.1 per cent it reported a year ago for the 20-year period ended in March 2014.

The real rate of return reflects what is made over and above global inflation. In USD nominal terms, the GIC portfolio generated an annualised return of 6.1 per cent over the same period.

As for portfolio mix, GIC said it has remained largely unchanged from the previous year in terms of asset classes and geographical distribution because it has a long-term investment horizon, and takes a bottom-up approach, picking investments based on individual merit.

GIC's exposure to equities in developed and emerging markets accounted for almost half its portfolio. Developed markets equities accounted for 29 per cent of the portfolio, while emerging markets equities 18 per cent.

The rest was in bonds, cash, real estate and private equity. On a geographical basis,

exposure to the Americas was highest at 43 per cent. followed by Asia at 30 per cent and Europe, at 25 per cent. Australasia accounted for the remaining 2 per cent.

Going forward, GIC said the investment environment over the next decade is likely to be more difficult for all investors. The sovereign wealth fund said asset prices, particularly in developed markets have risen strongly in the past five years, amid initial low valuations and loose monetary policy.  However, the outlook for economic growth and earnings has not improved by as much, so looking ahead, it expects real returns to be more modest than in the past.

Still, GIC said it will take advantage of short-term price volatility in order to generate good long-term real returns. It added that its exposure to emerging market equities will contribute positively to its portfolio over the long term.

- CNA/ly

CW8888:

No free lunch. Lower risk. Lower portfolio return will be expected!

Look at GIC's portfolio return. Right?