Singapore sovereign wealth fund GIC and state investor Temasek expect to slow their investment pace in the next 18 months, as they warn of lower long-term returns in a tougher investment climate.
Monetary and financial stresses in key economies, trade tensions between the US and China, slow global growth and high asset prices are some key reasons behind a cautious stance adopted by the investors, according to their annual reports published last week.
GIC saw a dip in its returns, achieving an annualised real return of 3.4 percent for the 20 years ending 31 March 2018, compared with 3.7 percent in the previous year. GIC does not discloses a rolling 20-year real rate of return, spanning 1998 to 2017, and not annual returns.
Lim Chow Kiat, chief executive of GIC, said in the report that GIC will “maintain a cautious investment stance” in view of high asset valuations, the increased risk of monetary policy tightening and the elevated market uncertainty.
However, even in this environment, GIC’s private equity portfolio grew to 11 percent from last year’s 9 percent. Asked about the reason behind the increase in holdings, a GIC spokeswoman said that the investor believes “it can find attractive idiosyncratic opportunities where the risk-reward is reasonable… and that its active teams have been working hard to identify and capture such opportunities, drawing on its long-term perspective, organisational capabilities and global network”.
Meanwhile, Temasek’s investments also saw a slight decrease in its annualised shareholder return in Singapore dollar terms, from 13.4 percent in FY 2017 to 12.2 percent in FY 2018.
Like GIC, Temasek expects global growth to moderate and may recalibrate investments. Temasek chairman Lim Boon Heng said the investor “will temper its investment pace in the year ahead, but remain open to intrinsically investable opportunities, including counter-cyclical ones”.
GIC and Temasek’s emphasis on the tech sector continue to be a key investment theme.
Last month, GIC and Temasek were among the main investors in a $14 billion fundraising by China’s Ant Financial – a spin-off from technology giant Alibaba.
In January, GIC and the Canada Pension Investment Board joined a Blackstone-led consortium in the $20 billion deal for a majority stake in the financial and risk business of Thomson Reuters. In October, it participated in the $4 billion funding round of Chinese e-commerce company Meituan-Dianping. GIC also appointed Wu Choy Peng in August 2017 to the new post of chief technology officer, “as it prepares for an environment of increasing disruptive innovation”, it said in a statement.
GIC invests directly and through external fund managers in start-ups, growth companies, pre- and post-listed companies.
Among Temasek’s tech investments for the year in include BluJay, a provider of supply chain execution software solutions for the logistics sector; Intapp, a growing vertical software provider focusing on business applications for the legal industry; ams AG, a leading analogue semiconductor platform focused on sensor solutions; and Internet Brands, an operator of a portfolio of health websites.