Investment Framework

GIC’s investment strategy is to build a portfolio comprising asset classes that generate good real returns over the long term, while adhering to the risk tolerance outlined by our Client.

How we build our portfolio

Our investment framework capitalises on our core strengths including our ability to invest for the long term, flexible capital and sound governance structure.

Take a total portfolio approach Separate beta or systematic risks from alpha or active management exposures
Be clear on risk tolerance that is consistent with the Reference PortfolioKeep to a disciplined ‘cost of capital’ measure for allocation of active risk capital

Policy Portfolio

The Policy Portfolio represents GIC’s asset allocation strategy over the long term. It accounts for the bulk of the risk and return potential of the GIC Portfolio. The Policy Portfolio seeks to balance the way different asset classes respond to varied possible economic environments.

The Policy Portfolio comprises six asset classes: Developed Market Equities, Emerging Market Equities, Nominal Bonds and Cash, Inflation-linked Bonds, Private Equity and Real Estate. Through the diversity of asset classes, the Policy Portfolio is expected to generate good risk-adjusted returns over a 20-year period.

Active Portfolio

The Active Portfolio comprises skill-based strategies to add value to the Policy Portfolio, while broadly maintaining the same level of systematic risk. The strategies are funded by the sale of assets in the Policy Portfolio, and so must generate higher returns to compensate for the cost of capital and higher risk involved.

We focus on owning assets with good long-term earning potential, at reasonable prices. Capitalising on our core strengths, we work to find attractive bottom-up investment opportunities.

Reference Portfolio

The Client owns the funds that GIC manages, and decides on the overall risk preference, which is characterised by a Portfolio made up of 65% global equities and 35% global bonds (“65-35”). The Reference Portfolio is not a benchmark, but an expression of the overall risk that the Client is prepared for the GIC Portfolio.

GIC’s investment strategy is to build a portfolio comprising asset classes that can generate good long-term returns above global inflation, while adhering to our Client’s risk parameters. On occasion, there may be a difference between the risk exposure of GIC and the Reference Portfolio. GIC may adjust its risk exposure, in times of market exuberance or when the opportunity arises. This is part of a disciplined, professional approach to long-term value investing.

Disciplined, long-term value investing

The key to implementing our investment framework is a disciplined approach to long-term value investing. We assess the value of an asset and keep to the price discipline, even if it may mean going against market sentiments.

To do so, we consider drivers of risk and return for each asset class to establish where true fundamental value lies. This involves both top-down and bottom-up analyses.