2021/22
Report Highlights
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The investment landscape is shifting rapidly. Years of concerns over deflation have turned into worries of elevated inflation, forcing economic policymakers to reverse stimulus policies. At the same time, the clock for the climate crisis is ticking, pandemic risk lingers on, and geopolitical conflicts and domestic political schisms are growing. GIC will continue to adapt to these changing realities while remaining anchored to our mandate, values, and investment principles.
— Lim Chow Kiat, CEO
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2 Investment Report
Generating good, stable returns over inflation
Over 20 years up to 31 March 2022, the GIC Portfolio’s annualised nominal and real (above global inflation) returns were 7.0% and 4.2% respectively per year.
Annualised Rolling 20-Year Real Rate of Return of the GIC Portfolio since 2001
Year ended 31 March
We continue to generate good, stable real returns.
Our diversified portfolio and cautious investment stance helped to cushion GIC’s performance from the market correction in early 2022. This posture was held throughout FY2021/22, given elevated asset valuations and uncertainty arising from potential inflationary pressures. We have kept our emphasis on being prepared for multiple scenarios, maintaining price discipline, adding optionality, and expanding our bottom-up investment activities.
Portfolio Diversification in an Environment of Resurgent Inflation
The resurgence of inflation has been a key theme shaping the global investment environment. It is especially important for GIC given our mandate to preserve and enhance Singapore’s international purchasing power for the foreign reserves that we manage.
As the environment changes, diversifying our portfolio and engaging in alternative scenario planning remain at the heart of our portfolio construction philosophy.
Investing in a World of Transition
In 2021, the recovery in economic activity on the back of vaccine rollouts and reopenings brought with it challenges such as a significant increase in inflation across advanced and emerging economies. This was driven by COVID-related supply disruptions, a rapid recovery in demand for certain goods, and rising wages.
Beyond the cyclical horizon, there are secular trends that have been reinforced by developments over the past few years related to COVID-19 and the flare-up in geopolitical tensions, such as:
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Technological advancement
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Pressures to reduce inequality of incomes and opportunities
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Transition towards a low-carbon economy
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3 Investing Sustainably
GIC is committed to enabling the global transition to a net-zero economy through our investments and operations. We believe that it is critical to focus on making a positive impact in the real economy. To do this, it is more constructive to actively engage and support companies in their transition towards long-term sustainability than to mechanically divest from certain industry sectors.
We believe most companies are in the middle of the spectrum and at varying stages of their transition depending on factors such as their history, the nature of their markets, and the technologies available to them. GIC’s role as a long-term investor is to encourage their transition efforts.
— Liew Tzu Mi, Chief Investment Officer of Fixed Income & Chair of the Sustainability Committee
Public Equities
As part of its opportunity sourcing process, the team leverages domain expertise across different sub-industries to map emerging themes that could accelerate the adoption of sustainable technologies in the real economy at scale. These efforts identified the ecosystem for autonomous and electric vehicles (EV) as a potential growth area, among other themes. In addition, in 2021, the department set up an Asia sustainability portfolio to focus on sustainability-linked investments.
Fixed Income
Our Fixed Income department has expanded investments from sovereign and corporate green bonds to sustainability-linked securitisations, carbon derivatives, and themes such as EV, renewable energy, and the circular economy. Within structured products, we see increased issuances in such themes and are invested in asset-backed securitisations of solar, agricultural, and affordable housing loans.
Private Equity
Our Private Equity department established the Electron Innoport, a global portfolio of funds and direct and co-investments that provides exposure to early-stage energy transition opportunities. Electron Innoport focuses on innovations that accelerate the transition to sustainable energy, covering themes such as increasing electrification, enhancing energy and resource efficiency, and new decarbonisation solutions. In parallel, the department has also made sizable commitments to climate-focused and impact funds with proven performance track records and established frameworks to measure and monitor their impact on the real economy.
Infrastructure
Our Infrastructure department has actively invested in emerging energy transition infrastructure opportunities. An infrastructure technology portfolio has been established to source for and support opportunities in evolving trends that have yet to become mainstream, but could positively accelerate transition in the real economy once they do. The team actively identifies and tracks disruptive megatrends, such as long-duration energy storage, the hydrogen economy, fusion energy, and carbon capture and sequestration, among others.
Real Estate
Our Real Estate department also tracks and invests in sustainability themes with the potential to disrupt the industry. For example, the department has invested in funds that focus on technologies that can reduce the carbon emissions or improve the energy efficiency of the built environment.
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4 Feature Article
The Biggest Value Add
As GIC navigates a world in transition, our people remain our greatest strength. We will continue to develop our capabilities and explore ways to optimise how our teams are organised. We will also continue to build investment capabilities and extend investment and operating platforms that enable us to take calculated investment risks, while reinforcing our organisational culture and values.
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5 Our People, Culture, and Community
At GIC, people are our biggest investment. Preparing and equipping them to fulfil GIC’s purpose — to secure Singapore’s financial future — while enabling them to thrive in their careers is vital to our success. Our focus is anchored to GIC’s mandate, PRIME values, and unwavering commitment to our people’s well-being.
The way we work is founded deeply on respect for one another and with a clear sense of purpose. We believe an inclusive environment, which promotes respect and active contribution, yields exceptional performance. When diverse teams feel included, we build shared belonging to one another and to GIC.
GIC-Mendaki Scholarship
In 2022, we partnered Yayasan Mendaki to launch the GIC-Mendaki Scholarship for Singaporean-Malay students to nurture interest and build competencies in the asset management industry and better engage different groups of talent in our local community.
GIC Women Leadership Programme
Last year, we also launched the GIC Women Leadership Programme to support and harness greater diversity in our leadership ranks. Under the programme, women in senior positions are given exposure, developmental, and networking opportunities with exemplary leaders from GIC and beyond, with the intention of strengthening their leadership capabilities.
GIC Enable Programme
To enable equal workplace opportunities for people with disabilities, our GIC Enable Programme offers internships to students with disabilities to provide meaningful career exposure and development. Since the programme was launched in 2019, seven students with disabilities have completed internships with us.