The Government of Singapore Investment Corporation, commonly known as GIC, which is one of the world’s major investors, gave a very gloomy image of the global economy.
According to the fund’s annual report, which was released on Wednesday, the portfolio of the fund had a 7% annualised dollar nominal rate of return for the 20 years that ended on March 31, 2022.
Despite solid returns for the year, Singapore’s national wealth fund GIC issued a warning about “profound uncertainties” due to concerns among investors about inflation, pandemic risks, and geopolitical issues.
In the end, the portfolio registered an annualized return of 7% over a 20-year period that ended on March 31, 2022, according to the organization’s report, which was published on Wednesday.
Keeping inflation at bay, the annualized 20-year real rate of return for the period ended March 31 was 4.2 %. GIC does not release its annual reports.
Nonetheless, GIC, as a world-wide investor among the largest in the industry, gave a dismal picture of the global economy.
“Years of concerns over deflation have turned into worries of elevated inflation, forcing economic policymakers to reverse stimulus policies,” CEO Lim Chow Kiat was quoted in the report.
“At the same time, the clock for the climate crisis is ticking, pandemic risk lingers on, and geopolitical conflicts and domestic political schisms are growing. There are no easy choices for policymakers and business leaders, and in turn, for investors.”
Inflation on the rise
The Monetary Authority of Singapore, Temasek Holdings, and GIC, a private company completely controlled by the Singaporean government, jointly manage Singapore’s reserves. This institution thinks that when there is an increased chance of inflation in the future, then the costs will be greater.
“High inflation not only reduces real returns immediately, but its adverse impact on economic stability raises the risk premia on financial assets,” Lim noted.
The CEO stated that as a result, he anticipates portfolio diversity to be “more challenging as few assets are spared from the effects of worsening inflation and slower economic growth.”
GIC claimed that its diversified holdings and careful approach to investing had aided in protecting its performance from the market drop that took place in early 2022.
“Given these uncertainties, we have doubled down on our core investment principles — diversify our portfolio, take the long view, and emphasize preparing rather than predicting,”Lim Chow Kiat, CEO OF GIC
In order to strengthen its sustainability work, the fund has announced that it will be establishing a sustainability-focused office to ramp up the work that has been done in that field.
The new office will deepen the research undertaken by the firm with respect to critical issues and will integrate sustainability into its investment and corporate processes even more, during the publication of its annual report, GIC made the statement.