Sovereign wealth fund GIC has been acquiring more real estate assets in recent years, and is keeping its ear to the ground for more deals, even as competition in the sector intensifies.
Toppish asset prices and lower returns will define the broader investment environment for the next 10 years, but GIC can use its 30 years' experience in real estate investing to earn steady returns, said group chief investment officer Lim Chow Kiat yesterday.
"Generally, prices have gone up, so it's harder to just buy cheap," he told a media briefing at GIC's Capital Tower headquarters.
"Even the (real estate and private equity) markets have also experienced high valuations and attracted a lot of new money. In the recent two to three years, there have been a lot of new participants bringing in large amounts of cash."
For this reason, GIC's real estate and private equity investments will be driven by "bottom-up opportunities" rather than any "plan to deploy large amounts of money" in these areas, he said.
Examples of such opportunities include GIC's investment in Brazil's largest independent hospital operator in May, even though the emerging market economy is in a recession. GIC opened its Sao Paolo office last year.
To its advantage, GIC has, over the years, built itself up as a "large and established real estate investor" with nine offices globally, said Mr Lim.
The real estate market is "less efficient and transparent than public markets so investors with greater information, expertise and access can earn above average profits", GIC said in its annual report, choosing real estate investing as the focus of a feature article.
GIC has more than 350 real estate investments in more than 40 countries. Its prominent buys include an undisclosed stake in New York's Time Warner Centre and 50 per cent of the Broadgate Circle in London's financial district.
As at March 31, GIC had 7 per cent of its assets parked in real estate and 9 per cent in private equity. Equities, bonds and cash make up the bulk of its investments.
GIC does not disclose the exact size of its portfolio, stating only that it invests "well over US$100 billion". But the Sovereign Wealth Centre puts the figure at close to US$342.64 billion ($468.54 billion).
The sovereign wealth fund yesterday reported a real rate of return averaging 4.9 per cent per year for the 20 years ending March 31. The number is taken net of global inflation, which is around 2 per cent to 3 per cent.
Another "area of strong interest" for GIC is private equity investments in Chinese tech companies, said Mr Lim. GIC has an office each in Beijing and Shanghai.
"We would, in fact, like to see more investments in China, especially in this new part of the economy because they have some really good entrepreneurs and they have a market that is very big.
"If an entrepreneur is able to come up with a good idea, they can scale quite quickly," he added.
GIC has also made efforts to squeeze higher returns for the state by becoming "more engaged" with its partners and investee companies, instead of simply taking on more risk.
Historically, GIC has been a shareholder in many companies for years, even decades.
GIC would monitor these firms but is now going in with a mindset of "providing solutions" instead of looking at them as "pre-packaged investment products", he said.
"We'll see if there are different ways we can give them capital, if we can help them link up with other (investee) companies. In the last two, three years, that has been the biggest effort," Mr Lim said.