GIC is cautious, expecting lower returns over the next decade

Singapore’s sovereign wealth fund GIC said it was turning cautious and expected returns to slow over the next decade, according to a Reuters report on July 10, 2017. 

This is due to high valuations, uncertainty over monetary policy and modest economic growth.

“Compared to last year, the world has become more uncertain … but the market seems quite happy,” GIC CEO Lim Chow Kiat said in an interview. “I hope the market is right, but we are cautious.”

Photo: Connected to India
Photo: Connected to India

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

GIC's portfolio return was 5.1 percent per annum in U.S. dollar nominal terms over the five years to March 31, 2017. This was an improvement, as compared to 3.7 percent a year ago. However, it 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,” Lim said. 

GIC also added that while market volatility was low by historic standards, helped by accommodative monetary policies, it was out of sync with increased overall uncertainty. Current valuations suggest excessive optimism over future earnings.