Singapore GIC Announces 20-Year Rolling Return Rate of 3.9%

GIC Private Ltd., Singapore’s government-owned investment fund, reported a 20-year annualized return rate of 3.9% on Wednesday, a 0.7% decline from last year, when the fund reported a 20-year return rate of 4.6%.

The sovereign wealth fund does not publicize its annual returns, but instead releases a rolling 20-year real rate of return, the fund’s primary metric for evaluating its investment performance.

For the 20-year period from April 1, 2004, through March 31, 2024, the fund reported an annualized nominal return of its U.S. dollar-denominated portfolio as 5.8%. Adjusted for global inflation, it reported a real rate of return of 3.9%. In 2023, the fund announced a 6.9% 20-year return before adjusting for inflation.

A decline in the fund’s rolling 20-year return is likely due to the 20-year measurement window dropping fiscal year 2004, which ended on March 31, 2004 and was a stronger year of returns, with a rolling return of 5.1%.

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“Even though the rolling 20-year real rate of return is intended to measure returns over the long term, it can still reflect a significant cyclical element,” GIC officials wrote in an investment report. “This is particularly evident when the cycles are very pronounced at the start or end of the 20-year window.”

As of March 31, 2024, the fund had allocated 32% of its assets to nominal bonds and cash, 18% to private equity, 17% to emerging markets equity, 13% to each developed market equities and real estate and 7% to inflation-linked bonds. The fund has an estimated $770 billion in assets under management.

From 2023 to 2024, the fund decreased its allocations to nominal bonds and cash to 32% from 34% and increased its allocation to inflation-linked bonds to 7% from 6% in order to add more resilience to inflation. Private equity also increased to 18% from 17%. Continued diversification is an important goal for the GIC.

“We do not just diversify across different asset classes, which most investors do,” said Lim Chow Kiat, the GIC’s CEO, in an investment letter. “We are able to diversify with far more granularity, particularly in private markets, because of the capabilities we have built up over many years.”

As an example, Kiat pointed to real estate. The fund has made various investments in subsectors across the asset class in various geographies, including investments in data centers, student housing and logistics. “These exposures have helped the total portfolio weather the recent sharp rise in interest rates as well as the sharp shift in U.S. commercial real estate,” he wrote.

The GIC’s portfolio is also globally diversified, with 39% of the fund’s assets based in North America, another 22% in Asia excluding Japan; 10% in the eurozone, 5% in the U.K. and 5% spread across the Middle East, North Africa and the rest of Europe. Approximately 4% of the fund’s assets are invested in each of South America and Japan.

“Investors are now in uncertain terrain and must rely on their purpose and unique strengths,” said Kiat in a statement. “In GIC’s case, our purpose—to preserve and enhance Singapore’s foreign reserves for the long term—means staying disciplined and diversified.”

The fund sees great potential in providing green climate-tech companies with long-term flexible capital. The fund noted that in 2023, a tough macro environment led to a 30% decline in venture and growth investment for climate-tech companies.

Kiat noted that these companies are often too mature for venture and growth equity investments, but often cannot obtain infrastructure financing from investors. To meet the demand for capital, GIC’s sustainability solutions group launched an investment program to bridge the funding gap for energy transition assets.

Singapore’s Sovereign Wealth Fund Posts 6.9% 20-Year Return

Expect Chronic Inflation, Says CIO of Singapore’s Sovereign Wealth Fund

Tags: GIC, GIC Private Limited, Lim Chow Kiat, Singapore, Sovereign Wealth Fund

Private equity under-allocation and underperformance are dragging down both the Dallas Police and Fire Pension System and the Employees’ Retirement Fund of the City of Dallas far below their peers, according to an analysis commissioned by the city of Dallas.

Investment adviser Commerce Street Investment Management compiled and in June presented its report to the city’s ad hoc committee on pensions, assessing the pension funds’ structure and portfolio allocation; reviewing the portfolios’ performance and rate of return; and evaluating the effectiveness of the pension funds’ asset allocation strategy.

The analysis also compared the investment returns of the two pension funds with similar-size funds in Texas, which include, among others, the Houston Firefighters’ Relief and Retirement Fund, the Houston Police Officers’ Pension System, the Houston Municipal Employees Pension System, the Austin Police Retirement System, the Austin Firefighters Retirement Fund, the Fort Worth Employees’ Retirement Fund, and the Texas County and District Retirement System.

According to the report, both Dallas pensions are significantly underfunded, with the Dallas Police and Fire Pension System’s funded ratio just 39%, while the Employees’ Retirement Fund has a funded ratio of 73%.

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“The City of Dallas will have to contribute significant funds to improve the funding status,” the firm wrote in the report.

The DPFP’s annualized returns over three, five and 10 years were well below those of its peers, earning 1.5%, 2.8% and 2.0%, respectively, while the Dallas ERF earned returns of 3.9%, 4.7% and 6.6%, respectively, over the same time periods. The DPFP’s 2.0% return over 10 years was not even close to the next-lowest 10-year return among its peers, the Austin ERS at 6.0%. Meanwhile, peer leader Houston MEPS earned annualized returns of 13.1%, 11.1% and 10.2%, respectively, over three, five and 10 years. The report showed average returns of 4.1%, 5.1% and 6.1%, respectively, over three, five and 10 years for public plans in Texas.

The report blamed the Dallas pension funds’ poor results in large part on having private equity allocations significantly lower than those of their peers. For example, Houston MEPS’ private equity allocation is 28.2%, and the average private equity allocation among the peer group is 21.3%, compared with the DPFP and Dallas ERF’s allocations of 12.2% and 10.5%, respectively,

The pension funds’ private equity returns were also far off their peers’ earnings, particularly the DPFP, which has seen its private equity portfolio gain only 4.8% over the past five years, compared with 17.6% for Houston MEPS and the peer average of 17.47%. Meanwhile, the ERF’s five-year private equity returns nearly tripled those of the DPFP at 14.865% but still come below the peer group average.

The Commerce Street report recommended that to improve the pension funds’ returns and funded ratios, the city should: analyze what top performing peers have done; collaborate to find new investment strategies; improve governance policies and procedures; and provide recommendations for raising the funds’ investment performance.