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Tuesday 28 July 2020

Defensive stance helps GIC post 20-year annualised real rate of return of 2.7%


Read? Defensive stance helps GIC post 20-year annualised real rate of return of 2.7%


 DESPITE the turbulence unleashed by the Covid-19 pandemic, GIC's portfolio remains resilient and Singapore's foreign reserves under its charge have been protected by the sovereign wealth fund's defensive stance and focus on its mandate, which is to first preserve and then enhance the value of the assets under its care.

 Over a 20-year period spanning April 2000 to March 2020, GIC's portfolio achieved an annualised nominal rate of return of 4.6 per cent. Taking into account global inflation, its annualised real rate of return stood at 2.7 per cent over the same period, compared to 3.4 per cent for the 20-year period spanning April 1999 to March 2019. (see amendment note)

 GIC is one of the three reserves management entities in Singapore, alongside the Monetary Authority of Singapore (MAS) and Temasek Holdings. The three supplement the annual Budget through the Net Investment Returns Contribution (NIRC), the single largest revenue source for the Singapore government.

Posted by Createwealth8888 at 14:03
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7 comments:

  1. mysecretinvestment28 July 2020 at 14:53:00 GMT+8

    It didnt say what was the absolute amount earned by GIC. While Temasek reported an annualised dividend income of $9Bn.

    And from the CPF Board annual report, it was reported that the Board paid out $14.35Bn in interests to CPF members in 2018. Is this sustainable?

    As I am "heavy weight" on CPF, any reduction to the interest rates means going back to the drawing board for my retirement plan.

    ReplyDelete
    Replies
    1. CreateWealth888828 July 2020 at 15:04:00 GMT+8

      You any time can change your plan and get out of CPF system.

      Board paid out $14.35Bn in interests to CPF members in 2018. Is this sustainable?

      Younger folks joining 1M65 movement later get shock if this is NOT sustainable and cut 2.5% down ward every year. Cham liao!

      Delete
    2. Spur28 July 2020 at 20:25:00 GMT+8

      For those who are planning to use CPF as high-yield "bank" after 55, a reduction of CPF interest rates will be a "rich people problem".

      The bigger issue is for the majority who will depend on CPF Life or RSS as their sole or main source of income during retirement. For sure if OA or SA interest rates are reduced, that means the underlying portfolio yield of CPF Life is also sub-standard .... and the monthly payouts will need to be adjusted downwards.

      There's a reason why the CPF Act does NOT state any minimum monthly payout for CPF Life. And was quite bluntly & crudely explained in parliament. ;)

      Delete
    3. CreateWealth888828 July 2020 at 20:33:00 GMT+8

      1M65 movement better take note and don't regret later.

      Delete
    4. Singapore Man of Leisure28 July 2020 at 22:17:00 GMT+8

      Spur and CW,

      Shh...

      Although I'll never voluntarily dump new money into CPF, let's not discourage others from doing so ;)

      I still have 30 to 40 years to go.

      I sleep better knowing more money goes into CPF than coming out.


      All bets are off if there are more old fogeys drawing blood from CPF Life than working adults contributing new blood to CPF...

      No fear.

      We can always revisit population 10 million ;)



      Delete
  2. Spur28 July 2020 at 20:03:00 GMT+8

    GIC AUM is state secret, so govt won't reveal. Both MAS & Temasek not secret, although their revelations through their annual reports have time lag of many months.

    In terms of depressed yields for many years, you should be worried more if you have longterm insurance endowments. If GIC with a reference portfolio of 65:35 international stocks to bonds cannot cross the 4% nominal returns, then insurance companies with typical 60+% bond portfolios will die male chick stand. LOL.

    Since GIC says they use 65:35 as a reference, I ran a quick backtest & yes, the annualised nominal returns from Apr 2000 to Mar 2020 is 4.6% for a 65:35 mix of US stocks, global ex-US, and global bonds.

    But looking at GIC annual returns, the results after 2015 is rather concerning. It's basically year after year of lower returns, despite a big boom in tech & US stocks. Even global & Asian stocks have done OK from 2016 till today.

    I think the problem is that GIC is allocating very high amount to bonds & cash during a period over the last 10 years when yields are close to zero. As of Mar 2020, it is total of 50%. Not sure whether they are seeing a lot of withdrawals as boomers & even early-Gen X are crossing the 55 yrs mark, and they need a lot of cash to avoid sequence of returns risk.

    Or they are seeing another major -50% drop in global & US stocks in the next 1-2 years? :P

    ReplyDelete
  3. Henry29 July 2020 at 15:29:00 GMT+8

    GIC issue SGSS to CPF for 4%. Tenure 20Y or 30Y i am not sure. Very little margin for error...

    ReplyDelete

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