Sustainable return, acceptable risk
GIC invests the reserves placed in our care by taking acceptable risks to deliver the best possible long-term return.
GIC strives to make the most of every investment opportunity to enhance returns on a total portfolio basis without taking too much risk. We invest primarily through our three investment groups – public markets, private equity and real estate. Our investment teams achieve strong performance over time by leveraging GIC’s core strengths: a long-term investment perspective; a global presence; and capabilities to invest in cross-asset opportunities.
- Public Market Investments – invests in publicly-traded markets, including equity and fixed income. GIC pursues both active and passive management strategies in equity investing. Our team of in-house research analysts and experienced portfolio managers conduct in-depth due diligence and research that enable us to identify undervalued stocks with the potential to generate good returns over the long-term. In fixed income, our portfolio managers employ a range of investment strategies to add value to the portfolio, including yield curve analysis, and credit, interest-rate duration and currency management.
- Private Equity Investments – invests through funds as well as directly in companies, partnering with our fund managers and management teams to help world-class businesses achieve their objectives. We are one of the largest investors in private equity funds and currently have over 100 active relationships with fund managers globally. We have also invested directly in more than 1000 companies globally across multiple sectors.
- Real Estate – invests in prime real estate worldwide. We manage a multi-billion dollar portfolio of direct and indirect property investments with more than 350 investments in over 40 countries, across most sectors. We are able to capitalise on the best investment and divestment opportunities as we operate in the entire real estate universe, from brick-and-mortar assets to public equities such as real estate operating companies, real estate investment trusts, and real estate-related debt instruments.
- Our deep expertise and in-house experience across asset classes enables natural cross-asset class synergies in deal sourcing, sharing of market knowledge and execution of investments.
- Our investment strategy is one of integrated diversity. The new and unique investment opportunities which continually arise call for GIC to operate as one integrated organization, fully exploiting our range of in-house asset class expertise and experience to optimise investment results. Our extensive team of on-the-ground specialists at our wide network of offices have their fingers firmly on the pulse of the world’s markets, enabling us to respond quickly to investment opportunities.
How we invest
Our investment framework distinguishes the three drivers of long-term performance for GIC: the performance of global markets, represented by the Reference Portfolio; our asset allocation strategy, as seen in the Policy Portfolio; and skill-based strategies, as embodied in our Active Portfolio.
- The Reference Portfolio comprises 65% global equities and 35% global bonds, which is a generally accepted passive alternative portfolio. It represents the Government’s risk and return tolerance. The Reference Portfolio is not a short-term benchmark for GIC. In fact, GIC can only benefit from long-term investing if it is prepared to tolerate short-term losses or underperformance relative to the market indices from time to time.
- The Policy Portfolio is the central component of the investment framework. It represents the key driver of returns over the long-term. The six core asset classes of the Policy Portfolio are:
- Developed market equities
- Emerging market equities
- Nominal bonds and cash
- Inflation-linked bonds
- Private equity
- Real estate
- The Active Portfolio comprises skill-based strategies to add value to the Policy Portfolio. These strategies are limited by a risk budget set by the GIC board. The strategies are funded by the sale of assets in the Policy Portfolio so they must generate returns sufficiently higher to compensate for the cost of capital and the higher levels of risk entailed.
Investing in a low-yield environment
We expect a difficult investment environment with modest growth prospects, greater uncertainty and a high degree of volatility in the macro economy and markets. In view of this, we have been been using all the levers at our disposal, as seen in our Beta, Alpha and Omega strategies.
- With Beta, we select the best asset classes and decide how much to put in each. Our Beta strategy also ensures that we remain resilient under different scenarios as we keep our eye on the longer term horizon. In the long-term, Beta is the biggest driver of our returns.
- With Alpha, we are out hunting for the best deals to add to our Beta gains. This includes seeking out “bottom-up” investment opportunities and diversifying across many active strategies. Our global network and our expertise from operating several asset classes together puts us in a good position to do so.
- Omega is a term that we use at GIC to keep portfolio costs in mind. These include transaction costs such as broker commissions, external manager fees, bid-ask spreads, market impacts etc. With Omega in mind, we keep a sharp focus on cost efficiency. This way, every dollar saved is a dollar earned.