“We have been preparing for a challenging investment environment for some time and our defensive position has helped in navigating the current turmoil. We remain vigilant, guided by our mandate, values and investment principles. We are ready to face an uncharted future, and will continue to invest the nation’s foreign reserves prudently.”
Lim Chow Kiat, CEO
Delivering resilient long-term returns
Over 20 years up to 31 March 2020, the GIC Portfolio’s annualised nominal and real (above global inflation) returns were 4.6% and 2.7% respectively every year.
Annualised rolling 20-year real rate of return of the GIC Portfolio since 2001
Year ended 31 March
Nominal annualised return & volatility of the GIC Portfolio (in USD, for periods ending 31 March 2020)
We have continued to deliver steady, resilient returns due to our diversified asset composition and our increasingly cautious and defensive stance in recent years.
Prior to COVID-19, we had observed high valuations, weakening market fundamentals, rising geopolitical tensions, and limited policy room to manage an economic downturn. Accordingly, we lowered our portfolio risk by reducing our allocation to equities in favour of cash, and factored in recession considerations when evaluating our investment transactions.
The asset mix reflects GIC’s defensive stance heading into the pandemic, which helped to cushion our portfolio against the market volatility.
Asset mix (31 March 2020 vs 31 March 2019)
We believe that companies with stronger sustainability practices will generate better risk-adjusted investment returns over the long term, and this relationship will strengthen over time.
GIC’s O-D-E framework
Integrating sustainability factors into our investment processes
Investing in thematic opportunities arising from climate change
Incorporating sustainability signals into quantitative strategies
Regularly screening our existing portfolio for ESG issues
Conducting additional due diligence for companies exposed to greater sustainability risks
Actively engaging our portfolio companies
Supporting the Task Force on Climate-related Financial Disclosures (TCFD)
Encouraging responsible consumption
Fostering collaboration and inclusion
Aiming to become carbon-neutral in our operations by FY20/21
To ensure our continued performance over the long term, GIC organizes major thematic changes such as sustainability using a holistic framework called O-D-E, where O refers to going on the Offensive when it comes to investment opportunities, D indicates Defensive risk management, and E is the manner in which we constantly improve our operations and processes to achieve Enterprise Excellence.
A changing global investment environment
The global community is facing a public health crisis, an economic crisis, and financial turmoil all at once – an unprecedented combination in modern times. Extreme safe-distancing measures have resulted in the deepest global downturn since World War II. The COVID-19 crisis has brought to the fore various market vulnerabilities and accelerated several shifts that could shape the global investment landscape going forward.
Uncharted policymaking given high debt levels and low interest rates
Intensified headwinds for globalisation
Asia to see rising headwinds, but still outperform over the long term
Industry consolidation to increase
How GIC is responding to this changing environment
Periodic crises are a feature of global financial markets and an unavoidable fact of investing for the long term. We harness lessons from our investment history to respond to current challenges:
Know ourselves well, including our mandate, values, risk capacity, capabilities, and constraints
Apply our key investment principles:
i. Prepare, not Predict
ii. Focus on the long term
Maintain organizational resilience
The investment uncertainties that result from the pandemic will require vigilance, agility, and resilience for the journey ahead. We continue to adhere to our core values and investment principles, refine our playbook and processes, and do our best to achieve steady long-term returns on the reserves under our management.
Our values and building confident communities
Our people and values serve as our organizational compass. We develop our people to enable our success, foster a diverse and inclusive culture, and give back to Singapore by building confident communities. We are committed to developing an understanding of long-term value among Singaporeans. The belief of inclusion extends to our community programmes which deliver long-term impact through a multiplier effect to build confident communities.
‘Differently Abled ’ Initiative
GIC is a member of Singapore Network of Disability and mentorship programmes aimed at enhancing the employability of individuals with special needs. Our employees volunteer as mentors to students with various disabilities, and we support SG Enable’s internship programme for these students to be deployed as interns in GIC.
GIC Sparks and Smiles (“GIC Sparks”)
GIC Sparks is a programme that empowers Singaporean youth from low-income households to make a difference to the community. Since its launch in 2015, more than 650 students have collectively volunteered around 17,000 hours to mentor disadvantaged children and youth. Through this experience, our GIC Sparks awardees develop the skills, confidence, and leadership, while also supporting our community partners in their outreach and benefitting the wider community.
GIC X Change
GIC X Change is a mentorship and volunteering programme. Like-minded GIC mentors and youth mentees come together to develop community service projects that are asset-based and build on the community’s strengths. In the process, ideas are also exchanged, mentor-mentee bonds are forged, and participants gain experiences and skills that serve them in their professional and personal capacities over the long term.
The GIC Portfolio rates of return are computed on a time-weighted basis, net of costs and fees incurred in the management of the portfolio.
Volatility is computed using the standard deviation of the monthly returns of the GIC Portfolio over the specified time horizon.