GIC Recoups Losses, Reveals Emerging Markets Outperform

The Government of Singapore Investment Corporation, manager of more than $100 billion of reserves, has released its annual report for the third year, revealing positive news: a recoup of most of the losses made in 2008 as stock markets rebounded.

(September 28, 2010) — The Singapore state investment agency – the Government of Singapore Investment Corporation (GIC) – has recovered most of its losses caused by the 2008 financial crisis, and has said it will focus increasingly on emerging markets as they trump developed economies.

“…we expect high growth in the emerging economies to continue, with expanding domestic demand offsetting slower growth in export demand,” group chief investment officer Ng Kok Song said in GIC’s annual report.

Late Monday, the GIC, ranked as the world’s sixth-largest state investment company by Sovereign Wealth Fund Institute in California, revealed the average rate of return on its investments increased to 7.1% in US dollar terms in the year ending March, up from 5.7% the previous year. The fund revealed holdings in the US fell to 36% of its portfolio in the year ended March 31 from 38% the previous year.

“Global stock markets recovered strongly in 2009. This was a rebound from the devastation in the financial crisis of 2008,” according to the GIC’s report. “The increase in value of the government’s portfolio in the financial year to 31 March 2010 largely offset the loss in the previous year.”

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Unlike Temasek Holdings, the notoriously secretive fund failed to provide the value of its assets or how much they rose or fell.

According to the GIC, its holdings of developed market equities rose to 41% of its portfolio as of March 31 from 28% a year earlier. Investments in fixed income and cash fell to 24% from 32% as funds were used for the purchase of equities, while its allocation to alternative investments — including real estate, private equity, infrastructure and natural resources — fell to 25% from 30%.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

(September 27, 2010) — A new survey reveals institutional investors in the UK are allocating nearly a third of their portfolios to alternative assets, up from 21% three years earlier.

The recent survey by JP Morgan Asset Management (JPMAM) reveals the trend toward alternatives will likely continue, with most respondents expecting to increase their allocations to alternatives – at the expense of equities – to 31% over the next two to three years.

Hedge funds had the highest alternative weightings, with an average allocation of 8.2% of a total portfolio, representing an increase from 6.1% in 2007. The analysis revealed this could rise to an average of 9.2% over the next two to three years. JPMAM said the number of schemes investing in hedge funds also increased notably — 45% of investors surveyed already had or were looking to invest in hedge funds, up from 23% in 2007.

Hedge funds were also deemed the most attractive investment for the longer term, along with private equity and real estate over the next two to three years. The report indicated that while real estate still enjoys the highest market penetration, the percentage of respondents investing or planning to invest in the asset class has fallen since 2007.

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From a regional perspective, UK pension schemes expect the strongest returns in alternative assets to come from emerging Asia. The region is particularly favored by private equity investors, the study noted, with 18% of respondents saying they plan to buy in this area over the next 12 months.

“It is clear investors are becoming more comfortable investing in alternatives as their understanding of such asset classes grows and, given the turbulent market conditions over recent years, they appreciate the increased level of diversification offered by alternatives,” J.P. Morgan Asset Management head of UK institutional Peter Ball said in a statement. “We continue to believe that hedge funds can offer the right investment solutions but it is key that investors are at ease with what they are investing in, which appears to be the case from the survey results.”

The research consisted of feedback from 25 completed surveys from public and private UK institutional investors.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742