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SINGAPORE: The Government of Singapore Investment Corp (GIC) revealed Tuesday that it achieved real return of 4.5% above global inflation from investments made over the past 20 years till 31 March 2008.
This was contained in GIC's first report published on how it is managed and governed, and how it invests Singapore’s foreign reserves.
In the 48-page document, the GIC also revealed that it had achieved a nominal annual rate of return from investments that was 5.8% in Singapore dollar terms, or 7.8% in US dollar terms.
But its deputy chairman and executive director Tony Tan said it is not realistic to expect such high returns to be sustainable.
Dr Tan said: "In the first five years following GIC's establishment in 1981, the rate of return was unusually high due to the favourable market conditions and GIC's relatively small portfolio at the time. Given the size of GIC's present portfolio, it's not realistic to expect that such high returns will continue."
Group Chief Investment Officer Ng Kok Song also noted that there will be a more challenging environment ahead.
He said: "Looking ahead, we see a more challenging investment environment than what we have seen since GIC's formation in 1981. The powerful trend of disinflation that propelled the global capital markets over 25 years seems to have ended."
34 per cent of GIC's portfolio is invested in the US, 35 per cent in Europe, and 23 per cent in Asia. 2 per cent is invested in Australia, and the remaining 6 per cent is in the Americas.
GIC said that while it's overweight on emerging Asia, it will continue to look to the US for bargains.
Dr Tan said both the Singapore public and international investment community will benefit from the clarity and disclosure on GIC's purpose, processes, governance, goals and its values.
This is especially with the growing interest in sovereign wealth funds (SWF) and how GIC, as a 27-year-old SWF, invests and operates.
"GIC has and will always invest for only one purpose – to achieve sustainable financial returns for the Government of Singapore’s assets" said Dr Tan at the news conference.
He also pledged that the GIC would continue to fulfil its mission of building up Singapore’s foreign reserves despite the challenging economic times.
Dr Tan told the media that the GIC has held steadfast over the years to its sole mission, which is to preserve and enhance Singapore’s foreign reserves.
"GIC's investment objective is to achieve a reasonable rate of return above global inflation with due regard to risks," he told reporters.
"GIC has met the investment objective by achieving an annualised real return of 4.5% over the same period, that is the 20-year period ended 31 March '08 despite global shocks like the dotcom bubble burst, the Asian financial crisis and the ongoing credit turmoil in the international financial markets."
Dr Tan said one key strategy of the GIC has been to diversify its assets while always focusing on long-term financial gains.
Being a professional fund management company responsible for investing
Singapore’s reserves, Dr Tan said the GIC has moved into assets like real estate, private equity and other alternative instruments while keeping a bulk of investments in public equities.
According to the report which is available at the GIC website, the GIC managed well over US$100 billion in investments - a figure it has released previously.
Since late last year, GIC made multi-billion dollar investments in global financial institutions suffering massive losses from US sub-prime, or higher-risk, mortgage investments.
GIC is confident the banks will show good returns after the global turmoil ends.
It would not confirm whether or not it will invest in Morgan Stanley and Goldman Sachs.
The sub-prime crisis has wreaked havoc in financial markets and led to a credit squeeze and fears for the global economy.
GIC announced in December that it would inject US$10.2 billion into Swiss bank UBS, and in January said it would pump US$6.88 billion into US banking giant Citigroup, another sub-prime victim.
- AFP/CNA/yb/sf/ls
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