Singapore's GIC shifts to Asia

Singapore sovereign wealth fund GIC yesterday signalled it would shift its focus to Asia after its portfolio shed 20 percent following heavy losses on Western investments during the global meltdown.

The Government of Singapore Investment Corp (GIC), which invests the city-state's massive foreign reserves, did not provide the current value of its portfolio or how much it actually lost during the period.

The fund lost massive sums after betting on Western banks but said that it had already recouped part of its losses as markets have recovered in recent months. The 20 percent portfolio drop was in Singapore dollar terms.

"Like many large institutional investors, GIC's portfolio had been impacted in the severe global downturn of 2008," said deputy chairman and executive director Tony Tan.

"In recent months, we had recovered a good part of our losses as the markets performed better," he said in a statement accompanying an annual report.

In exclusive remarks to Singapore media published yesterday, Tan said "it's likely that there'll be more growth opportunities in Asia as compared to the developed world."

"One would expect that over time, GIC would have more investments in Asia, but we've no prescribed limit," the Straits Times daily quoted him as saying.

As of March, Asia accounted for 24 percent of GIC's portfolio while the U.S. market took up 38 percent and Europe's share stood at 29 percent. The remaining nine percent was in Australia and other economies.

GIC is one of Singapore's two state investment vehicles together with Temasek Holdings and its aim is to preserve and enhance foreign reserves. Both firms rank among the world's largest sovereign wealth funds.

Group chief investment officer Ng Kok Song said in the report that GIC's portfolio managed to recover more than half of last year's losses because global equity markets rebounded early this year.

GIC has recouped its initial losses from its investment in U.S. banking giant Citigroup but Ng cautioned that its investment in Swiss lender UBS would take longer to yield positive returns.

"We invested in the two banks in early 2008 during the initial stages of the financial crisis, and built in some downside protection," said Ng.

"While both banks still face challenges in returning to profitability, we maintain our confidence in their long-term prospects," he said.

GIC had announced last week it made a profit of US$1.6 billion after selling a more than four percent stake in Citigroup. Its stake in the U.S. bank is now less than five percent.

Tan said in the GIC statement that "as a long-term investor, we will not be distracted" by short-term market movements.

"GIC will remain forward-looking and seize good investment opportunities that will help us achieve our goal of achieving a reasonable rate of return over global inflation over the long term," he added.

GIC said the global downturn dragged down its 20-year nominal annual rate of return in Singapore dollar terms to 4.4 percent from the 5.8 percent it reported in the previous fiscal year to March 2008.

In U.S. dollar terms, the nominal annual rate of return over 20 years dropped to 5.7 percent from 7.8 percent.

This is the second year running that GIC has made public its annual report. As the protector of Singapore's foreign reserves, it has traditionally been more cautious about revealing its investment details.