GIC Real Returns Dip to Five-Year Low as Fund Navigates ‘Unprecedented Uncertainty’

Singapore’s GIC saw its inflation-adjusted investment performance slip to the lowest level since 2020 during the 12 months to the end of March, with a report by the sovereign wealth fund showing its annualised real rate of return over the past two decades dipping to 3.8 percent from 3.9 percent a year earlier.

The reading is the weakest since the fund recorded a real return of 2.7 percent five years ago, according to the report. Stripping out inflation effects, the 20-year annualised nominal return slipped to 5.7 percent from 5.8 percent.

GIC touted the stable long-term returns and portfolio resilience of the fund, whose assets under management are estimated at over $800 billion. Nonetheless, CEO Lim Chow Kiat warned of an intensification of cyclical, structural and foundational shifts such as fragmentation of the global trading system and the continued impact of artificial intelligence and climate change.

“These shifts are much harder to prepare for, and we need to be vigilant when navigating such unprecedented uncertainty,” Lim said Friday in a release.

China Optimism

The US remained GIC’s largest market in terms of capital deployment, with investments in the Americas rising to 49 percent of the portfolio at the end of March from 44 percent a year earlier. The Asia Pacific allocation eased to 24 percent from 28 percent, while Europe, the Middle East and Africa’s share held steady at 20 percent.

In China, GIC expects increased stimulus measures to lessen downside risk and accelerate domestic demand growth. The mainland property sector is showing recovery signs after three challenging years, leading to a boost in both investor and household confidence, according to the report.

“There is renewed optimism around China’s technology and AI advances as well, aiding the transition towards a more productive economy,” GIC said. “However, the exact boost to long-term productivity growth remains uncertain.”

After setting up an investment scheme for green assets the previous year, the sovereign giant said it would take a granular approach to its future energy bets to reflect on-the-ground realities.

“While there are long-term opportunities in electrification and energy efficiency, differences in how countries view their energy supply means investment trends will not be uniform across regions,” the report said. “This requires a targeted approach that accounts for local market dynamics, which is only possible due to GIC’s long-term, flexible capital and global presence.”

Property Bottom Sighted

Real assets as a percentage of GIC’s portfolio stood at 23 percent at the end of March, barely changed from 22 percent a year earlier, as equities shot up five points to 51 percent and fixed income fell six points to 26 percent.

“Real estate valuations are potentially bottoming, presenting attractive investment opportunities,” GIC said. “Continued growth and development, particularly in emerging economies, digitalisation of the economy, and the climate transition also continue to offer compelling investment prospects for infrastructure.”

In May, a GIC joint venture with Canadian developer CLV Group announced plans to acquire Toronto-listed apartment trust InterRent for C$4 billion ($2.9 billion). If completed, the deal would mark the Singaporean fund’s second acquisition of a Canadian property trust, following the $801 billion fund’s 2023 buyout of Summit Industrial Income REIT in partnership with Dream Industrial REIT in a $4.4 billion cash deal.

GIC also joined with Swiss fund manager Partners Group and Abu Dhabi’s Mubadala Investment Company to buy Techem, a German provider of energy-saving services to the real estate sector, at an enterprise value of €6.7 billion ($7.8 billion), in a deal announced last week.