GIC warns of investor complacency

The current investment environment is considerably uncertain and valuations in many markets are high, meaning returns may be inadequate for the risks being taken, the Singaporean sovereign wealth fund said in its annual report.

There is investor complacency in global investment markets as high pricing continues in considerably uncertain times, according to the Singaporean sovereign wealth fund, GIC Private.

In its annual report GIC pointed to Brexit, the US Presidential elections, and heightened geopolitical tensions as uncertainties that do not seem to have been priced in to the market, which will ultimately lead to inadequate returns for the risk being taken.

GIC’s report said that trends related to populism, geopolitics, disruptive technology, and even monetary policy, have raised fundamental questions about the future macroeconomic and investment environment. It concluded that standard risk models given these uncertainties are insufficient.

“As a long-term value investor, we remain cautious and recognise that to generate good real returns over time, we have to be prepared for periods of underperformance relative to the market indices, some even for a stretch of several years,” commented Lim Chow Kiat, chief executive of GIC.

“We are prepared for a period of protracted uncertainty and low returns. A key part of GIC’s investment strategy in such an environment is to ensure that the GIC Portfolio remains robust across a range of plausible scenarios.”

Lim was promoted from deputy group president and group chief investment officer to his current role in November, replacing Siong Guan Lim who retired in January 2017.

GIC recorded an annualized real rate of return was 3.7 percent in the 20-year period ending March 31, slightly down on the 4 percent it recorded last year.

GIC does not release annual performance numbers or specific returns for each of the asset classes it invests in. However, the fund, which currently has over $100 billion in assets under management, has 7 percent allocated to real estate but is targeting a 9 to 13 percent allocation in the long-term.