GIC chief on tackling uncertainty: Ensure a range of options

GIC chief executive Lim Chow Kiat.
GIC chief executive Lim Chow Kiat.PHOTO: GIC

These uncertain times mean investors should ensure they have a range of options, including keeping some cash as "dry powder" for more immediate needs, said GIC chief executive Lim Chow Kiat.

Mr Lim's remarks yesterday came as he outlined the sovereign wealth fund's strategy for what are challenging times.

The fund's annual report noted in July that it had adopted a more defensive stance amid slowing global growth and uncertainties from trade tensions.

Its cash and bond allocation stood at 39 per cent as at March 31 - the highest since it adopted its latest investment framework in 2013.

GIC is also expanding its networks of partners and investee companies, noted Mr Lim, who was speaking at the annual GIC Insights forum, where global business leaders discuss issues pertinent to the business and investment community.

He said at the forum that investors are "hard put to find their footing", with the world at a turning point and the geopolitical mood souring amid rising populism, societal divisions and trade protectionism.

"They face rising uncertainty but falling returns," he added, noting that uncertainty over economic prospects is at the highest on record now. Policymakers also seem to have limited ammunition to reflate economies, and interest rates are already at depressed levels.

Negative-yielding bonds are no longer a "market oddity" as well, he noted.

GIC chief executive Lim Chow Kiat said investors are "hard put to find their footing", with the world at a turning point and the geopolitical mood souring amid rising populism, societal divisions and trade protectionism.

They accounted for a third of global tradable bonds as at mid-August - a valuation of US$17 trillion (S$23 trillion) - based on data from the Bloomberg Barclays Global Aggregate Bond index.

"Faced with potential opportunity costs of missing out on positive returns, investors have also been moving into more risky assets," he said. "It is a quandary."

But there remain bright spots, with breakthroughs in technologies such as artificial intelligence, 5G and blockchain creating new industries.

"This is also where we already find the middle ground, between technology and traditional companies," he said. "The convergence of their business models is producing many interesting investment opportunities."

Mr Lim added that GIC's investment strategy emphasises diversification. It looks beyond economic cycles as well, capitalising on short-term dislocations.

This means that it also positions itself for longer-term trends such as the rise of the middle class in Asia, the innovation engine of the United States and Europe's leadership in sustainability.

Already, about 30 per cent of GIC's portfolio is in Asia, and this is likely to increase if the region continues its strong growth trajectory, Mr Lim said in July. This proportion was more than that for most global institutional investors.

A version of this article appeared in the print edition of The Straits Times on September 20, 2019, with the headline 'GIC chief on tackling uncertainty: Ensure a range of options'. Print Edition | Subscribe