Serious GIC rate of return fall now to only 4% per annum over last 20 years!!

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An honorable member of the Coffee Shop Has Just Posted the Following:

Gay Loong sleeping on the job? How about Lim Siong Guan? This is really pathetic returns. 4% per annum don't even cover inflation rate. That means they have been sufffering a loss for years. The indirectly pay CPF holders 2.5%, then the remianing 1.5% eaten up by overhead, admin, salaries, rental, etc. So, they are suffering a big loss.

Dip in annualised real rate of return for GIC

• By Nicole Tan
• Posted 28 Jul 2016 06:00

The GIC office building in Singapore. (Photo: AFP/Roslan Rahman)

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SINGAPORE: Sovereign wealth fund GIC generated an annualised real rate of return of 4 per cent over the 20-year period that ended Mar 31 this year, down from 4.9 per cent a year ago, according to its annual report published on Thursday (Jul 28).
As the rate is calculated based on a rolling return, the investment firm attributed the decline partly to a bumper year in 1996 dropping out from the rolling 20-year return period.


Annualised Rolling 20-Year Real Rate of the GIC Portfolio since 2001. (Graph: GIC)


GIC explained that the 4 per cent rate of return also takes into account major events over the last 20 years, including the Dot Com Bubble and Bust in 2000 and the Global Financial Crisis in 2008.
The investment firm has well over US$100 billion in assets under management and its portfolio is distributed across six core asset classes – developed market equities, emerging market equities, nominal bonds and cash, inflation-linked bonds, real estate and private equity.
Over the past year, the investment firm said it has taken a more defensive approach, increasing its allocation to bonds and cash at the expense of some equity exposure.
Asset allocation to nominal bonds and cash rose to 34 per cent for the year ending Mar 31, edging down from 32 per cent the year before.
Over the same period, the asset mix in developed market equities fell to 26 per cent, compared to 29 per cent a year ago.


Asset Mix of the GIC Portfolio. (Table: GIC)


Looking ahead, GIC says real returns are expected to be lower in a protracted period of all-time low-interest rates, modest global growth prospects and high valuations of financial assets.
GIC Deputy Group President and Group Chief Investment Officer Lim Chow Kiat said the challenges include high debt and an exhaustion of policy options, especially in the area of monetary policy.

Valuations of financial assets are also high and returns based on starting valuations are low by historical standards, according to GIC.

The company estimated that a portfolio comprising 65 per cent US stocks and 35 per cent US bonds is expected to generate real returns of 1 to 2 per cent over the next 10 years, well below the historical average of 5.2 per cent.

Still, GIC said it saw opportunities for active investment in the current environment of low yield and high uncertainty by taking a bottom-up approach rather than allocating based on geographies and industries.

Mr Lim said there were two main situations that offered a "good starting point": Markets which have experienced a crash or bad sell-off - such as natural resources, commodities or even financials in some regions - and sectors that are fundamentally doing well such as healthcare.


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