Singapore’s GIC Boosts Cash Amid Europe Crisis, U.S. Slowdown
Government of Singapore Investment Corp., manager of more than $100 billion of the city-state’s reserves, said it almost quadrupled its cash allocation and cut investments amid Europe’s debt crisis and slowing U.S. growth.
Cash made up 11 percent of its portfolio in the year ended March, up from 3 percent a year earlier, GIC, as the sovereign wealth fund is known, said in its annual report today. Stocks declined to 45 percent from 49 percent as it pared equities in developed markets, it said, and bonds were reduced to 17 percent from 22 percent.
“Risk aversion returned to global financial markets in the last financial year,” GIC said in its annual report. “There will be greater uncertainties in the future.”
Policy makers across the world are preparing for a deeper impact from Europe’s debt woes, with Singapore’s economy unexpectedly contracting last quarter and China and South Korea cutting interest rates this month. Europe was plunged into fresh market turmoil as calls for bailout aid sent borrowing costs surging, while Moody’s Investors Service lowered Germany’s rating outlook to negative.
GIC’s holdings in Europe fell to 26 percent from 28 percent, with those in the U.K. unchanged at 9 percent, it said. Within Europe, GIC’s assets in Portugal, Ireland, Italy, Greece and Spain made up 1.4 percent of its portfolio, mainly held in real estate and stocks in Italy and Spain, it said.
Assets in the Americas were unchanged at 42 percent, with 33 percent of the total portfolio in the U.S., it said. It raised its allocation to Asia to 29 percent from 27 percent.
Annualized Return
The so-called 20-year annualized real return was 3.9 percent as of March 2012, unchanged from the previous fiscal year, it said. The annualized nominal rates of return in U.S. dollar terms was 3.4 percent over 5 years, 7.6 percent over 10 years and 6.8 percent over 20 years, it said. The fund doesn’t report an annual return or disclose the actual size of its portfolio.
Holdings in so-called alternative assets increased to 27 percent from 26 percent, it said, with a gain in private equity and infrastructure investments. Real estate was unchanged at 10 percent of its portfolio, it said.
“Due to the heightened uncertainty in global markets, we allowed the cash inflow from investment income and fund injection to accumulate during the year in preparation for better investment opportunities,” GIC said.
To contact the reporter on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net
To contact the editor responsible for this story: Linus Chua at lchua@bloomberg.net
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