GIC sees more opportunities in real estate, private equity than equities

The Government of Singapore Investment Corporation (GIC) has said real estate and private equity investments can give better returns compared to equities.

So it said it will continue its investments in these areas as part of its emerging markets strategy.

Speaking at a CFA Institute Conference on private wealth management on Wednesday, GIC’s group chief investment officer, Ng Kok Song, said developed economies will continue to see slower growth over the next ten years while emerging markets continue to prosper.

GIC expects global Gross Domestic Product to grow by 3.8 per cent this year, with advanced economies expanding by 2.4 per cent. Emerging Asia is forecast to grow at 8 per cent this year.

It added that industrial output in emerging Asia has recovered fully and now stands at 12 per cent above pre-crisis levels, while developed economy output remains 2 per cent below levels seen two years ago.

Mr Ng said: “So what do we do as investors in this new investment landscape? (We) have to grapple … between deflation risk and deteriorating sovereign debt ratings in the developed economies versus inflation risks and stronger credit ratings in the emerging economies.

“As a result of our review of our policy portfolio, GIC has decided to increase further our investments in the emerging economies, especially in Asia.”

As of March this year, GIC’s exposure to emerging market equities was 10 per cent, or about one fifth of its global equity portfolio.

In GIC’s annual report released on Monday, it said it had recouped most of its losses made during the financial crisis as stock markets rebounded.

Its real rate of return in excess of global inflation was 3.8 per cent, up from 2.6 per cent a year ago.

GIC added that gains in the last fiscal year lifted its 20-year nominal annual rate of return to 7.1 per cent in US dollar terms from 5.7 per cent. And this was possible because the fund had executed strategies to exploit the investment opportunities.

Mr Ng said: “It is not sufficient to be reasonably prescient in discerning the future landscape, but we need also to have positioned the portfolio ahead of time before the future scenario is reflected of discounted in asset prices.”

One example is how GIC increased its investments in public equities from 38 per cent in 2008 to 51 per cent last year.

GIC has investments valued at about S$132 billion.

Mr Ng, who is also the chairman of the Wealth Management Institute, said private wealth industry leaders also see Asia’s growth creating more affluence.

The CFA Institute reported that in 2009, high net worth individuals – those with assets greater than US$100 million – rose 26 per cent from 2008. It added that this trend is likely to continue, with double digit growth in the number of high net worth individuals in 2011.

Source : Channel NewsAsia – 29 Sep 2010

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