Singapore sovereign wealth fund GIC has posted its best performance since 2015. For FY2020/21 ended March, GIC recorded an annualised rolling 20-year real rate of return of 4.3%, up from 2.7% in the previous FY.
This signals higher potential contributions to Singapore’s coffers as the projected budget deficit hits $11 billion.
The fund measures its performance by evaluating returns over a 20-year period. The figure for FY2020/21 represented the average annual return of GIC’s portfolio between April 2001 and March 2021, with global inflation taken into account.
FY2000/01, which saw the dot-com bubble, was a “poor year”, says GIC chief executive Lim Chow Kiat, a contributing factor to the spike in real rate of return.
Emerging markets equities took a slightly larger share of GIC’s portfolio at 17%, up from 15% in the previous year. Meanwhile, nominal bonds and cash fell in allocation to 39% from 44%.
Across geographies, GIC’s portfolio weighted more on Asia ex-Japan at 26%, up from 20% a year earlier. The US continues to be GIC’s largest region by exposure, with 34% of its assets based there.
Singapore has three entities managing its reserves: GIC, financial regulator Monetary Authority of Singapore (MAS) and state investor Temasek. Under the Net Investment Returns Contribution (NIRC) framework, the Singapore government can spend up to half of the long-term expected investment returns generated from the companies.
See: Temasek portfolio hits all-time-high of $381 bil, profit jumps over 500% to $57 bil
GIC’s buoyant figures mirror that of Temasek’s. Last week, Temasek reported a net portfolio value of $381 billion for FY2021 ending March 31, 2021, up $75 billion, or 24.5%, from $306 billion last year.
Sustainability focus
Since launching its Sustainable Investment Fund last July, GIC has been investing in sustainable technologies around the world, with announcements made as recently as this week.
On July 19, GIC announced it had invested an undisclosed amount in US-based green energy firm Qmerit.
GIC partnered Connecticut-based private equity firm Lime Rock New Energy for the investment, earning a seat on Qmerit’s board as part of the deal, according to a press release.
Qmerit installs electric vehicle charging stations, targeting residential and small business markets in North America. Past investors include Lime Rock and Schneider Electric.
That same day, GIC announced an undisclosed minority stake in Brazilian biological agricultural inputs company Biotrop Solucoes Biologicas.
Biotrop products can be applied to the soil or plants to enhance the growth of soybeans, corn, wheat and other crops. The company currently markets in Brazil, Argentina and Paraguay, but plans to expand within Latin America, as well as enter the US.
See also: GIC invests $93 mil in Hong Kong digital asset company BC Group
These are just the latest in GIC’s growing stable of clean and renewable energy investments. In January, GIC acquired a 19.9% stake in Duke Energy Indiana for US$2.05 billion. Duke Energy Indiana supplies power to about 810,000 residential, commercial and industrial customers in the US.
Last year, GIC invested US$200 million in a geothermal heating company backed by China's biggest oil refinery. Sinopec Green Energy Geothermal Development, which reportedly provides heating to more than 60 cities and counties in China, according to joint founder Arctic Green Energy Corp of Iceland.
