Investment Report

GIC’s mandate is to preserve and enhance the international purchasing power of the reserves under our management over the long term. The primary metric for evaluating GIC’s investment performance is the annualised rolling 20-year real rate of return.

For the 20-year period from 1 April 2005 to 31 March 2025, the annualised US$ nominal return of our portfolio was 0.0%. After adjusting for global inflation, the annualised 20-year real return was 0.0% (see Box 1 for more detail on the mechanics behind the calculation of the rolling 20-year return).

Over the long term, the GIC Portfolio’s performance is largely driven by the dynamics of the global economy, our asset allocation strategy, and skill-based strategies undertaken by our active strategy investment teams that seek to add returns above market benchmarks. In total, we strive to achieve good and sustainable long-term returns for the GIC Portfolio across a broad range of economic scenarios, within the risk parameters set by our Client, the Government of Singapore. This is described in more detail in the chapter ‘Managing the Portfolio’.

While the primary metric for tracking the GIC Portfolio’s investment performance is the rolling 20-year return above global inflation, we also monitor our ongoing intermediate investment performance. Table 1 shows the nominal (i.e. not adjusted for inflation) US$ returns over 10 years and five years and the corresponding portfolio volatility. We include 20-year nominal numbers for completeness here.

Over the 20-, 10-, and 5-year periods, the GIC Portfolio returned 5.6%, 5.0%, and 6.1% in nominal US$ terms, respectively.

Over the past decade, global investors, including GIC, have experienced notable differences in the investment environment across two distinct phases. The pre-pandemic period was marked by near-zero interest rates, stable inflation, and low market volatility. In contrast, the post-pandemic period has seen significant dispersion across asset classes, driven by five forces, some of which are interconnected: the COVID-19 pandemic, geopolitical realignment, resurgent inflation, tightening monetary policy, and rapid technological transformation.

The COVID-19 pandemic triggered extraordinary market volatility, causing sharp declines in equities. This prompted supportive monetary and fiscal measures that aided recovery albeit divergent across regions and sectors. Most developed markets benefited from larger and swifter fiscal support, allowing their economies to recover more rapidly than emerging markets.

Escalating geopolitical conflicts, particularly the Russia-Ukraine war, intensified supply chain disruptions already impacted by the pandemic and increased market uncertainties, fuelling global inflation. In response central banks tightened monetary policy, resulting in a higher cost of capital and challenges for all assets, especially fixed income.

The introduction of ChatGPT in late 2022 marked a significant advance in artificial intelligence (AI), boosting nominal growth in developed market equities, particularly in the United States (US). This strong performance contrasted with emerging market equities, as China’s economy faced challenges such as slowing growth and deflationary pressures amid a deleveraging in the property sector.

The strong performance of risk assets through the post-COVID-19 period led to high returns across most balanced portfolios. One such balanced portfolio is GIC’s Reference Portfolio, which comprises 65% global equities and 35% global bonds (see Table 2). The Reference Portfolio is not a performance benchmark for the GIC Portfolio but represents the risk the Client is prepared for GIC to take in generating good long-term investment returns. On occasions when we are more risk-averse than the risk profile of the Reference Portfolio, such as when market exuberance leads to heightened valuations, we may lower our risk exposure. Conversely, we may increase our risk exposure when the opportunity arises. This is part of a disciplined approach to long-term value investing.

Table 2 shows the nominal US$ returns over 20-, 10-, and 5-year periods and the corresponding volatility for the Reference Portfolio which acts as a risk reference for the GIC Portfolio.

Over all three time periods, and particularly over the last five years, the GIC Portfolio had lower volatility than the Reference Portfolio. This was due to our diversified asset composition and pre-emptive measures to lower portfolio risk in recent years.

To better reflect our approach to portfolio construction, we group our asset classes in three broad asset groups: Equities, Fixed Income, and Real Assets. This grouping covers our holdings across both public and private markets and captures our exposure to the key factors of growth, income, and inflation respectively.

In the year ending 31 March 2025, the share of equities increased, while the fixed income share correspondingly decreased. Within equities, we increased our investments in the US. The US continues to be GIC’s largest market in terms of capital deployment. The share of real assets remained stable over the year.

The geographical distribution of the GIC Portfolio as at 31 March 2025 is set out in Figure 3 below. It reflects the results of our asset allocation strategy and bottom-up opportunities sourced by our investment teams worldwide. While we do not allocate our assets by geography, we do monitor our exposures across regions. The geographic mix references classification in commonly used industry benchmarks.

The resilience of the global economy is being challenged by rising uncertainty. We have witnessed elevated market volatility since the start of the year, driven by heightened economic policy uncertainty. This was characterised by rising trade tensions, uncertainty over the extent of stimulus in China, and shifting central bank reactions against the uncertain economic backdrop. In addition, geopolitical tensions continued to simmer in the background, particularly around great power competition and ongoing conflicts in Europe and the Middle East. There are bright spots though, mainly in the form of greater stimulus measures from Europe and China in the face of growing external challenges, as well as technological developments around AI which may boost productivity growth. Overall, the range of potential economic outcomes has widened.

The medium-term outlook will be increasingly driven by supply shocks. Higher inflation and increased macro uncertainty induced in part by domestic and geopolitical pressures are two main forces that will continue to play out. Climate change, the energy transition, deglobalisation, the reconfiguration of supply chains, increasingly fraught domestic politics, and a more active government role across industrial and security policy are likely to create a volatile environment. Growth and inflation may potentially move in different directions, influencing correlations across asset classes. The thrust of policies launched this year also has the potential to reinforce these medium-term dynamics.

• In the US, policy changes around tariffs, immigration, and government spending are weighing heavily on sentiment. While the actual outcomes of these new policies remain uncertain, most scenarios suggest a higher likelihood of increased inflation and an increased probability of recession. However, these worries are balanced by healthy private sector balance sheets, while in aggregate imbalances remain moderate.
• In Europe, policymakers are responding to the rising threat from US policies. For instance, the new fiscal plans for German infrastructure spending have created upside possibilities to reinvigorate growth and improve the medium-term outlook. However, uncertainty around implementation remains.
• In China, the pivot towards greater stimulus limits downside risks. Domestic demand growth will likely accelerate, supported by the more expansionary fiscal stance and policy easing, which partially offset the slowdown in the external sector. The property sector is also bottoming out after three painful years of adjustment, boosting both investor and household confidence. There is renewed optimism around China’s technology and AI advances as well, aiding the transition towards a more productive economy. However, the exact boost to long-term productivity growth remains uncertain.
• More broadly, we continue to see the macro impacts of the rise of populism. In regions as diverse as Asia, Europe, and Latin America, ballot box pressures have pushed leaders to sacrifice macro stability for populist measures. Governments are taking on more debt while avoiding the painful but necessary structural reforms. Markets have therefore begun to price in higher political risk premia, reversing long-term trends.

The great power conflict between the US and China is also likely to drive the continued restructuring of supply chains and heightened protectionism, pushing up cost pressures over the medium term, but also potentially bringing new players into the global trading system. An environment of volatile tariff policies, used partly as a negotiating tool for political outcomes, implies higher uncertainty, inflation volatility, and risk premia. These will not just impact financial markets, but also hurt corporates who will need larger buffers to absorb these shocks. The result will be a less efficient and more costly trading system.

A few key elements of the changing investment environment will likely prove durable and impact returns for the next decade. First, governments globally are prioritising national security issues and economic resilience over economic efficiency. At the same time, they are struggling to maintain domestic legitimacy. These challenges may increase fiscal spending and push debt levels higher. Second, in China, trend growth is poised to slow given an ageing population and lower productivity growth. Policymakers are grappling with the right policy mix to transition towards sustainable long-term growth against cyclical external headwinds. Third, AI could meaningfully raise longer-term growth and productivity. There are questions around timing, scale, and scope, particularly over the distribution of positive and negative impacts. Last, climate change progresses even as investor attention has waned. Successful rollout of green policies and technologies could reduce the physical risks and enable higher growth. However, a failed transition would see more adverse climate events and lower, more volatile growth. Climate-related spending would likely add to inflationary pressures over the medium term as well.

Asset return expectations continue to be characterised by a wide dispersion across markets and within asset classes. A riskier world with more uncertain future outcomes will paradoxically see “risk-free” rates rise as investors require higher expected returns to save for tomorrow and not spend today. At the same time, compensation for taking additional market risk is likely to be lower as starting valuations, after a long period of low yields, are high.

GIC needs a resilient and agile portfolio to handle the wider range of potential outcomes in a more uncertain environment. In recent years, GIC has progressively implemented greater granularity and flexibility in our asset allocation. This should stand us in good stead in the years to come.