GIC Returns Fall to 10-Year Low as Real Estate Allocation Holds Steady

GIC last month upped its stake in Shanghai Nanxiang InCity Mega Mall to 98%

Singapore’s GIC saw its investment performance fall to a more than 10-year low during the year ending 31 March, with a report released by the sovereign wealth fund showing it annualised rate of return over the past two decades falling to 5.8 percent from 6.9 percent a year earlier.

Taking inflation into account, the fund’s real rate of return over the period was 3.9 percent, GIC said in a release. Based on a more recent performance, the government investment body achieved annualized 5-year nominal returns of 4.4 percent, a slight improvement from the half-decade ending a year earlier.

The fund, whose assets under management are estimated at $770 billion, has diversified on a more granular level in recent years to enhance its portfolio’s resilience, including stepped-up investment in infrastructure and real estate, it said. Real estate’s share of the portfolio held steady at 13 percent at the end of March, following a three-percentage-point increase in the previous financial year.

Investors in the current climate are facing an “uncertain terrain” expected to continue to weigh on returns, said GIC chief executive Lim Chow Kiat. “Amidst this volatility, we must play to our strengths and seize new opportunities.”

Green Tech Attractive

Kiat cited climate technologies like green steel and battery storage as a good fit for GIC’s long-term investment thesis, noting that such strategies often find themselves caught between traditional buckets of capital: too mature for venture and growth equity, yet lacking the track record to attract infrastructure funding.

GIC chief executive Lim Chow Kiat

“This year GIC established an investment programme for green assets, following the early success of the sustainability solutions group in the private equity department investing in climate technologies,” Lim said.

Some 39 percent of GIC’s portfolio was invested in US ventures at the end of March, representing the largest share of the fund’s portfolio by geography, followed by Asian countries outside of Japan at 22 percent.

The fund’s management pointed to tighter-for-longer monetary policy in the US, heightened geopolitical tensions and macroeconomic challenges in China related to its property market, as potential threats to investment performance.

“The prevailing uncertainty underscores the importance of humility in forecasting and reiterates our belief in preparing, not predicting,” the report said.

China Strategy Takes Shape

As part of its China strategy, GIC is looking for opportunities to acquire stakes in local units of multinational firms exiting the mainland market, according to a Wednesday report in the Financial Times.

“There are companies that are rethinking, or have rethought, their focus and exposure in China … and are looking to de-risk, or sell down entirely, their businesses,” GIC investment chief Jeffrey Jaensubhakij told the newspaper. “If the right asset comes at the right price, because someone has made a change in strategic direction, then it’s an opportunity.”

The fund would look for opportunities to invest in such mainland entities alongside private equity firms, Jaensubhakij said.

GIC bet on China’s resilience in June when it acquired a 48 percent stake in Shanghai’s largest single-building shopping mall from its partner in the project, China Vanke, bringing the Singaporean investor’s interest to 98 percent. A unit of Vanke retains a 2 percent stake in the asset, known as Shanghai Nanxiang InCity Mega Mall.

The shopping centre forms part of GIC’s strategy to invest in “dominant super-regional malls in top-tier major Chinese cities,” the fund said in 2020 announcing the mall’s opening.

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