Singapore's GIC Turns to Emerging Markets to Boost Returns
2008-09-23 04:17:10.730 GMT
By Chen Shiyin and Shamim Adam
Sept. 23 (Bloomberg) -- Government of Singapore Investment
Corp., overseeing more than $100 billion of reserves, is turning
to emerging markets and private equity to boost returns after
cutting back stocks and investments in developed nations.
The fund, known as GIC, raised holdings of natural
resources and hedge funds, and cut bonds to a quarter of its
portfolio from more than three quarters 25 years ago, it said.
Stock sales since mid-2007 enabled it to spend $18 billion on
stakes in UBS AG and Citigroup Inc. in the past year.
``We see a more challenging investment environment,'' Chief
Investment Officer Ng Kok Song said today. ``The powerful trend
of disinflation that propelled the global capital markets over
25 years seems to have ended.''
GIC said annual returns in the past 20 years averaged 7.8
percent in U.S. dollar terms, compared with 7 percent for the
MSCI World Index. The fund wants a longer-term investment
performance after the 1997 Asian financial crisis, 2001 Internet
slump and the credit crisis damped returns in recent years.
The subprime mortgage meltdown sent the MSCI World Index to
the lowest in three years, wiping out almost $14 trillion from
global stock markets this year.
``There are risks stemming from severe macroeconomic
imbalances in the world economy, the rising cost of energy and
food, and continued de-leveraging of global financial
institutions,'' Ng added in a statement.
Opportunities
UBS shares have fallen 59 percent since GIC announced the
investment in December, and Citigroup has declined 26 percent
since the government fund's purchase in January, as both banks
wrote off almost $100 billion on investments linked to U.S.
subprime mortgages.
Ng said at a press conference today he's ``confident'' both
investments will offer long-term returns, though he admitted the
timing of the stake purchases could have been better. The fund
received so-called reset payments from the two banks to
compensate for the decline in the share prices. He declined to
be more specific.
GIC was ``surprised'' at the magnitude of the credit crunch,
though it's ``not closing the door'' to opportunities emerging
from the crisis, he added.
Financial institutions worldwide have reported more than
$500 billion in losses and writedowns. The credit crunch,
triggered by a U.S. housing slump, led Lehman Brothers Holdings
Inc. to file for bankruptcy and forced the sale of Merrill Lynch
& Co. to Bank of America Corp. last week.
Stock Holdings
GIC's holdings of stocks have fallen to 44 percent of its
portfolio from about half two years ago, while its investments
in alternative assets such as private equity and real estate
rose to 23 percent from 20 percent. Cash made up 7 percent of
its holdings as of March, it said.
The Americas made up 40 percent of its assets, down from as
much as 45 percent two years ago. Investments in Europe rose to
35 percent from 25 percent. Asia now accounts for 23 percent of
its investments, with Japan making up almost half of them.
The 20-year returns announced today are part of efforts to
disclose more amid rising scrutiny of sovereign funds as they
increase investments globally, GIC said.
The average return over the two decades was 5.8 percent in
Singapore dollar terms.
Shares in U.S. billionaire Warren Buffett's investment firm
Berkshire Hathaway Inc. gained 21 percent in the same period.
Temasek
Hong Kong's Exchange Fund, the $181 billion pool of assets
that backs the city's currency, had an investment loss of HK$35
billion ($4.5 billion) in the first half because of declines in
global equities. The fund in July said it took a HK$32.1 billion
loss from investments in Hong Kong equities and a HK$25.4
billion loss on investments in overseas stocks.
GIC's returns compare with Temasek Holdings Pte's average
18 percent since inception more than three decades ago. Temasek,
Singapore's state-owned investment company with a $130 billion
portfolio, said last month the global credit crisis will last
two more years, drying up investment opportunities and
constraining economic growth.
Temasek, which led investments in Merrill Lynch and
Barclays Plc as the credit market collapsed in the past year,
said returns from investments in publicly listed companies
slowed to 7 percent in the year ended March from 27 percent in
the previous year. Temasek is the state's investment company,
while GIC, set up in 1981 to manage the city-state's foreign
reserves, is the government's fund manager.
--With reporting by Linus Chua. Editors: Andreea Papuc
To contact the reporter on this story:
Chen Shiyin in Singapore at +65-6212-1170 or
[email protected];
Shamim Adam in Singapore +65-6212-1102 or [email protected].
To contact the editor responsible for this story:
Tony Jordan at +65-6212-1150 or [email protected].
2008-09-23 04:17:10.730 GMT
By Chen Shiyin and Shamim Adam
Sept. 23 (Bloomberg) -- Government of Singapore Investment
Corp., overseeing more than $100 billion of reserves, is turning
to emerging markets and private equity to boost returns after
cutting back stocks and investments in developed nations.
The fund, known as GIC, raised holdings of natural
resources and hedge funds, and cut bonds to a quarter of its
portfolio from more than three quarters 25 years ago, it said.
Stock sales since mid-2007 enabled it to spend $18 billion on
stakes in UBS AG and Citigroup Inc. in the past year.
``We see a more challenging investment environment,'' Chief
Investment Officer Ng Kok Song said today. ``The powerful trend
of disinflation that propelled the global capital markets over
25 years seems to have ended.''
GIC said annual returns in the past 20 years averaged 7.8
percent in U.S. dollar terms, compared with 7 percent for the
MSCI World Index. The fund wants a longer-term investment
performance after the 1997 Asian financial crisis, 2001 Internet
slump and the credit crisis damped returns in recent years.
The subprime mortgage meltdown sent the MSCI World Index to
the lowest in three years, wiping out almost $14 trillion from
global stock markets this year.
``There are risks stemming from severe macroeconomic
imbalances in the world economy, the rising cost of energy and
food, and continued de-leveraging of global financial
institutions,'' Ng added in a statement.
Opportunities
UBS shares have fallen 59 percent since GIC announced the
investment in December, and Citigroup has declined 26 percent
since the government fund's purchase in January, as both banks
wrote off almost $100 billion on investments linked to U.S.
subprime mortgages.
Ng said at a press conference today he's ``confident'' both
investments will offer long-term returns, though he admitted the
timing of the stake purchases could have been better. The fund
received so-called reset payments from the two banks to
compensate for the decline in the share prices. He declined to
be more specific.
GIC was ``surprised'' at the magnitude of the credit crunch,
though it's ``not closing the door'' to opportunities emerging
from the crisis, he added.
Financial institutions worldwide have reported more than
$500 billion in losses and writedowns. The credit crunch,
triggered by a U.S. housing slump, led Lehman Brothers Holdings
Inc. to file for bankruptcy and forced the sale of Merrill Lynch
& Co. to Bank of America Corp. last week.
Stock Holdings
GIC's holdings of stocks have fallen to 44 percent of its
portfolio from about half two years ago, while its investments
in alternative assets such as private equity and real estate
rose to 23 percent from 20 percent. Cash made up 7 percent of
its holdings as of March, it said.
The Americas made up 40 percent of its assets, down from as
much as 45 percent two years ago. Investments in Europe rose to
35 percent from 25 percent. Asia now accounts for 23 percent of
its investments, with Japan making up almost half of them.
The 20-year returns announced today are part of efforts to
disclose more amid rising scrutiny of sovereign funds as they
increase investments globally, GIC said.
The average return over the two decades was 5.8 percent in
Singapore dollar terms.
Shares in U.S. billionaire Warren Buffett's investment firm
Berkshire Hathaway Inc. gained 21 percent in the same period.
Temasek
Hong Kong's Exchange Fund, the $181 billion pool of assets
that backs the city's currency, had an investment loss of HK$35
billion ($4.5 billion) in the first half because of declines in
global equities. The fund in July said it took a HK$32.1 billion
loss from investments in Hong Kong equities and a HK$25.4
billion loss on investments in overseas stocks.
GIC's returns compare with Temasek Holdings Pte's average
18 percent since inception more than three decades ago. Temasek,
Singapore's state-owned investment company with a $130 billion
portfolio, said last month the global credit crisis will last
two more years, drying up investment opportunities and
constraining economic growth.
Temasek, which led investments in Merrill Lynch and
Barclays Plc as the credit market collapsed in the past year,
said returns from investments in publicly listed companies
slowed to 7 percent in the year ended March from 27 percent in
the previous year. Temasek is the state's investment company,
while GIC, set up in 1981 to manage the city-state's foreign
reserves, is the government's fund manager.
--With reporting by Linus Chua. Editors: Andreea Papuc
To contact the reporter on this story:
Chen Shiyin in Singapore at +65-6212-1170 or
[email protected];
Shamim Adam in Singapore +65-6212-1102 or [email protected].
To contact the editor responsible for this story:
Tony Jordan at +65-6212-1150 or [email protected].
