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Singapore state investor GIC cautious on markets, eyes lower returns


An employee is silhouetted against the logo for the Government of Singapore Investment Corp. (GIC) during GIC's staff conference, in Singapore.

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An employee is silhouetted against the logo for the Government of Singapore Investment Corp. (GIC) during GIC’s staff conference, in Singapore.

Smaller Singapore peer Temasek Holdings focuses on equities, but GIC, set up to manage Singapore’s foreign reserves, adopts a more conservative investment strategy, with the long-term goal of beating global inflation.

GIC is ranked the world’s tenth biggest sovereign investor, with about $343 billion worth of assets, according to Sovereign Wealth Centre.

On Monday, the fund said its portfolio return was 5.1 percent per annum in U.S. dollar nominal terms over the five years to March 31, 2017, helped by the run-up in global financial assets, versus 3.7 percent a year ago.

But that was below the 6 percent return of GIC’s reference portfolio of 65 percent global equities and 35 percent bonds.

“We are prepared for a period of protracted uncertainty and low returns,” said Lim, 47, who took charge as the CEO in January after a 24-year career at the fund.

While market volatility was low by historic standards, helped by accommodative monetary policies, it was out of sync with increased overall uncertainty, the fund said.

Current valuations, it added, suggest excessive optimism over future earnings. MSCI’s gauge of world equities struck record highs last month.

“Two years ago, we said the market would return x over the next 10 years. We would argue half of the x was returned in the first year, year and a half,” said Jeffrey Jaensubhakij, GIC’s Chief Investment Officer. “Now there is only half an x over the next eight and a half years.”

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