GIC a big PE fan

GIC, the government of Singapore’s $320 billion sovereign wealth fund, said in August that it was continuing to increase its allocation to private equity – because the long-term performance numbers show that it has outstripped public equities over time.

“Investing in private equity [is] a higher-risk activity, but the strategy has worked well for GIC so far,” the fund said in a feature article on private equity in its 2014 annual report. “Returns from the asset class since its introduction into the GIC Portfolio have exceeded returns from public equities.” It didn’t supply precise return details, but it did say that private equity was its highest expected returning asset class (albeit also the highest risk).

As a result, GIC has now increased its allocation to private equity to 9 percent, as of 31 March 2014, up from 8 percent at the same time last year. And it hopes there’s more to come: its target allocation to private equity, as set in March 2013, is currently between 11 and 15 percent. By way of comparison, its allocation target to real estate is currently 9 to 13 percent (last year it fell from 8 percent to 7 percent).

Most of GIC’s private equity investment to date has been in buyouts, with a focus on North America (Asia accounts for less than a third of the portfolio).
All told, this has helped the giant Singaporean fund deliver an annualised return of 4.1 percent over the last 20 years, as of 31 March 2014. In US dollar terms, that means that if you’d put in $100 on day one, you’d have $352 million today, according to GIC.

So what next? In the near term, it’s feeling relatively bullish about its second best-performing segment, emerging markets equities. And no wonder: according to the IMF, these economies will enjoy growth of 4.6 percent in 2014, well ahead of the 1.8 percent forecast for developed markets. It recently opened an office on Brazil, and has already invested in retailer Netshoes and education provider Abril.