While the global equities and bonds markets dropped, the Government of Singapore Investment Corporation’s portfolio incurred a 20-plus-percent loss in terms of Singapore dollars at the end of the first quarter of 2009 as compared to the same period a year ago.
GIC, which manages the foreign reserves of Singapore, noted in its second released yearly report that the loss dragged its 20-year nominal yearly rate of returns from 5.8 percent to 4.4 percent.
After global inflation has been taken to account, the actual rate of returns was 2.6 percent – less than the 4.5 percent recorded last year – on GIC’s investment portfolio over the last 20 years. However, with a substantial recovery in worldwide markets in the past few months, GIC’s portfolio likewise recovered more than 50 percent of the loss incurred in 2008, according to the sovereign wealth fund.
While GIC reveals the size of its available funds as "well over US$100 billion ($142 billion)," Deutsche Bank AG approximates that the actual size of the funds is nearly US$350 billion.
Doctor Tony Tan, the deputy chairman at GIC, said that the government-run corporation’s fund had "weathered the financial crisis well."
"We had anticipated the crisis and taken precautionary action which mitigated losses in the ensuing bear markets," Tan said.
Such “precautionary actions” included trimming down its exposure to stocks by 10 percent over a 15-month, from July 2007 until September 2008.
"As a long-term investor, we do not try to time the markets. I’ve been with the GIC since it was established in 1981 and we’ve never timed the market, except (this) once," Tan said.
Such an action "averted a larger loss in the severe market decline between September 2008 and March 2009," noted Ng Kok Song, the chief investment officer at GIC.
In early 2009, the fund repurchased public equities it had earlier sold "so as to restore the portfolio’s public equities to its pre-crisis levels. There was a 30-per-cent difference between the sale and repurchase price levels," Ng explained.
The value of the portfolio of Temasek Holdings, which is GIC’s sister investment trust, was recorded at $130 billion at the end of March 2009, lower by 30 percent than last year’s $185 billion. However, in a just a four-month period until the end of July, Temasek Holding’s portfolio value rose to $172 billion, or 93 percent of the highest level reached in March 2008.
"I think Temasek’s portfolio is more Asian-centric," Ng explained as to why GIC did not recover as much as its sister fund did.
In March 2009, 24 percent of GIC’s assets are in Asia, 45 percent are in the Americas, 29 percent are in Europe, and 2 percent are in Australasia.
Ng also said that GIC’s 2007 multi-billion-dollar investments in UBS and Citigroup have "recovered significantly.” While the investment in UBS is still reflecting a deficit, $2.3 billion worth of realised profit was generated from the Citigroup investment. GIC, whose investment horizon spans 20 years, stated that it has no immediate plans to put its UBS stake up for sale. Looking forward, GIC revealed that it is currently putting more accent on emerging markets.