GIC reports steady 20-year real return of 4%

GIC posted slightly brighter long-term returns last year amid a pick-up in global economic growth and financial markets. -- FILE PHOTO: BLOOMBERG
GIC posted slightly brighter long-term returns last year amid a pick-up in global economic growth and financial markets. -- FILE PHOTO: BLOOMBERG

GIC posted slightly brighter long-term returns last year amid a pick-up in global economic growth and financial markets.

The fund manager achieved a "steady" 4 per cent annualised real rate of return over a 20-year period, according to its annual report out this morning.

This means that over the 20 years to March 31, GIC made a return averaging 4 per cent a year on top of having guarded its portfolio value against global inflation. In nominal US dollar terms, the return was 6.5 per cent.

The mandate for GIC, which manages over US$100 billion (S$126.5 billion) of Singapore's foreign reserves, is to achieve long- term returns for the Government that are above the rate of global inflation.

The performance was an improvement over the annualised 20-year figure of 3.9 per cent in the previous fiscal year.

GIC group president Lim Siong Guan noted in the report: "Stock markets in the United States rallied strongly on the back of 'quantitative easing' by the Federal Reserve and signs that the US economy was gradually moving towards sustainable growth."

"Europe continues to struggle with anaemic growth... Japan looks at chances of breaking its 20-year malaise while China contemplates the restructuring of its economy," he added.

GIC outlined a new investment framework to help it manage its portfolio post the global financial crisis.

The rates of return over shorter time frames were also disclosed. GIC returned an annual nominal US dollar rate of 2.6 per cent over five years - down from 3.4 per cent last year while over 10 years, it posted a return of 8.8 per cent, up from 7.6 per cent the previous year.

As a comparison, the 10-year returns outgunned a portfolio consisting of a 65:35 mix of global equities and global bonds, as well as US endowment funds.

The mix of GIC's portfolio changed over the year. Its allocation to nominal bonds rose from 15 per cent to 19 per cent, while its cash component fell from 11 per cent to 7 per cent. In terms of geographical distribution, the US share rose from 33 per cent to 36 per cent and Japan dipped from 12 per cent to 10 per cent.

Market observers said it was a respectable performance.

APS Asset Management chief investment officer Wong Kok Hoi said: "Global inflation has been quite low in the last few years, and capital markets have done well."

Ms Victoria Barbary, director at the London-based Institutional Investor's Sovereign Wealth Centre, added: "Returns for diversified institutional investors have been better, as the US economy started to recover and the euro zone crisis stabilised during the year."

Last month, Temasek Holdings released its annual report. Its 20-year annualised total shareholder return - the return to its shareholders as if it held the portfolio directly - was 14 per cent.

alfoo@sph.com.sg