Seeking alpha at GIC
At GIC, we seek alpha with our mandate in mind – to preserve and enhance Singapore’s foreign reserves. Given the lower beta returns outlook and rising uncertainty in recent years, GIC has been working hard to find attractive alpha opportunities and increase the overall resilience of our portfolio. To do so, we are continually strengthening our top-down and bottom-up capabilities and competitive advantages, including:
Managing the portfolio with a long-term horizon
Being a long-term investor with a flexible mandate has allowed us to reap illiquidity premia from investing in alternative asset classes, non- traditional sectors and less mature markets. GIC was amongst the earliest institutional investors to move into the illiquid alternatives space, investing in real estate and private equity from the mid- 1980s. Today, we are well-diversified in our range of alternative investments with our exposure spanning other areas like infrastructure, private debt, bespoke financing, hedge funds, and more – all of which we invest directly in as well as indirectly through funds and other platforms.
Alternatives remain a strong source of alpha for GIC globally and we seek investments with good risk-reward. For example, we see opportunities in infrastructure assets (e.g. utility-based) that provide long-term contracted incomes, downside protection and steady returns, and real estate sectors (e.g. senior living, manufactured housing, data centers) which are outside most traditional institutional investor mandates.
We also target structural trends like technological disruption, sustainability, and the growing middle- class in the emerging markets, to generate more alpha over time.
Amidst the uncertainty, our long-term horizon also enables us to better withstand market fluctuations, and take advantage of market dislocations when attractive risk-reward opportunities arise.
Flexible, cross-asset class mandate and expertise
Our flexibility to invest across the public and private markets, capital structure and life-cycle of a company, enables us to be adaptable to the evolving and diverse needs of businesses.
Our private markets expertise provides an information advantage in the credit and public equity markets. It helps us to underwrite the fair value of underlying assets in public deals, as well as identify where the best value is across the investable universe as each asset class is subject to their own cycles. Being able to pivot between various capital markets in the search for value can be a key source of alpha.
At the same time, our public markets expertise allows us to add value as a long-term private equity partner for companies seeking to list their businesses. We share our perspectives on best practices as well as our contacts with our portfolio companies, and have even stayed invested in several companies many years after their IPO.
GIC’s Integrated Strategies Group (ISG) was created specifically to seek out unique opportunities that do not fall neatly into any one investment group. Through bespoke capital solutions for family offices and listed companies, alternative deal sourcing via family offices and family-owned businesses, and investments in niche sectors and specialty funds, ISG seeks to enhance GIC’s alpha-producing capability and capacity.
Established local presence and networks
Having a long-term presence and investment experience in key financial hubs in both developed and emerging markets have helped us grow strong relationships with our partners, fund managers, investee companies, and other best-in- class business leaders. This gives us invaluable access to market insights and deal flow.
As one of the largest institutional investors in the private markets, GIC has an extensive global network of businesses that significantly benefit from being connected and providing growth opportunities for one another. Similarly, we generate alpha indirectly by leveraging a select group of prominent industry experts within our Global Investment Advisory (GIA) programme, who are strategically placed on the boards of our investee companies. These experts share industry insights and assist with strategy and direction for the companies.
With the COVID-19 crisis accelerating the use of technology at every level, digital transformation is crucial in defining how businesses remain relevant and forward looking. In addition to seeking attractive tech-related investments, we must accelerate the adoption of technologies like cloud and automation at the enterprise level as legacy infrastructure becomes obsolete. This also helps to defend our portfolio from disruptive forces.
At GIC, we embed tech specialists in our investment departments to develop relevant models for each asset class, as we continually improve our algorithms and investing strategies. Technologies like machine learning and artificial intelligence augment our teams’ abilities to draw unique insights from our large portfolio database and market data. We believe this improves idea generation, investment decisions, and efficiency across the asset management and execution process.