The latest annual report by Singapore’s sovereign wealth fund GIC suggests the fund witnessed a sharp dip in performance in FY2021/22, with its highly liquid portfolio hit by the global market turmoil that followed the Russian invasion of Ukraine.
GIC’s 20-year real return has decreased (4.3% to 4.2%), which means that FY2021/22 real return was lower than that of FY2020/01 (6.0%). Similarly, the five-year nominal return has decreased (8.8% to 7.7%), which means that FY2021/22 nominal return was significantly lower than that of FY2016/17. According to our estimates, GIC’s real rate of return is likely to have been negative in FY2021/22, ending March 31.
GIC continues to have a fairly liquid portfolio (73% in bonds and stocks) when compared to other Sovereign Investors of similar mission and risk profile. The 4% increase in private markets is partly due to allocation changes, and partly due to the drop in bond and stock prices during the first quarter of 2022. Exchange rate movements have led to a 2% shift in regional exposure from Europe to the US.
The fund was buoyed by a significant positive capital contribution from government of S$75.0 billion, while both GIC and Temasek provided dividends totalling S$21.6 billion.
GIC’s Sustainable Investment Fund (SIF) continues to lead ESG efforts across asset classes, including its incubator Electron Innoport, although its scale in the fund’s overall portfolio remains unclear.
We believe “Secondaries” will be a particularly important strategy in 2022-2024 as the fund tries to add mega-deals to increase further the exposure to private markets, while ensuring risk exposures do not threaten returns.
In terms of its overall recruitment, GIC has added over 100 employees in the past year, indicating its willingness to continue being an active investor with strong in-house capabilities. It has now opened its office in Sydney in Australia, led by veteran real estate investor Sunny Tsun and supported by ten local hires. We estimate that GIC has invested over US$15 billion in Australian properties, from hotels and malls to offices and student housing, and we expect this number to increase rapidly.
