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GIC Annual Report 2021/22 Highlights

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2021/22

Report Highlights

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1 CEO's Letter

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:

  • Technological advancement

  • Pressures to reduce inequality of incomes and opportunities

  • 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

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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.

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