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I covered Temasek last month, now is the time to take a closer look at his older brother. Singapore’s Sovereign Wealth Fund GIC released its annual report in July, but, as always so far, the figures are not complete, as some are not yet showing.
Officially, the GIC reports neither total assets under management nor one-year rates of return (which is understandable, of course, given its long-term investment horizon). Nevertheless, independent analysts provide estimates of the performance and value of its portfolio.
Global SWF, a three-year platform for monitoring government wealth and pension funds founded by the former global director of PWC and chief executive officer of SWF internships at PwC, calculated that GIC results reached a record 37.5 percent last year. ended on March 31, surpassing even the typically more aggressive Temasek who returned 24.5 percent.
Their estimates also put the total AUM figure at $ 744 billion – or just over $ 1 trillion SUR, for the first time in GIC history.
Significantly, this comes after several years of stability in the fund’s operations, as shown in the chart below (figures are in US dollars). It turned out that the pandemic was pretty good for business.
Singapore is getting richer thanks to COVID-19
While I was researching a few weeks ago, the global Covid-19 crisis has actually made the prudent city-state richer by several hundred billion dollars, due to stock market gatherings around the world (the result of fiscal and monetary stimulus to combat the virus-induced economic crisis) with rising demand for the Singapore dollar.
It turns out that my earlier estimates of over $ 200 billion that Singapore probably gained last year were quite cautious. If the above figures are correct, the exact number easily exceeds $ 400 billion, given the increase in the value of the GIC’s share of $ 260 billion, on top of the $ 181 billion gained by a combination of growing foreign exchange reserves and Temasek’s portfolio – even after the government 19, which will amount to approx. $ 54 billion by the end of this year.
It’s time to shop
Given these incredible amounts, you may now be thinking- “Great! What can we spend everything on? But the answer is, unfortunately – “not much.” Here’s why:
Singapore’s foreign exchange reserves protect exchange rates and are not intended for their free drawing. Occasionally some amounts are moved to the GIC for a more profitable investment, but overall billions of dollars on the MAS are held in liquid assets to ensure that the SGD is neither very nor very weak.
Billions in Temasek are invested in stocks — some of which may be quite liquid, but are usually long-term investments. A quarter of its portfolio is tied up in Singapore and in critical companies like Singapore Airlines. Also, about 45 percent are in unlisted assets that would be difficult to liquidate.
Finally, there is the GIC, which indirectly manages the money of the Central Insurance Fund (CPF), as the proceeds from the sale of special bonds that protect your CPF savings are transferred to it for investment purposes.
CPF current balances amount to $ 485 billion – almost half of the total assets of GIC. The remaining $ 500 billion from the $ 1 trillion pile would technically be part of national reserves, but the company must maintain a healthy reserve, assuming future economic crises could undermine the value of its portfolio (while millions of Singaporeans are legally entitled to permanent returns on their CPF).
Its primary role is not to invest aggressively, but to maintain a fairly low risk profile, with an above-average return over a decades-long horizon.
Hypothetically, there could be $ 200-300 billion in reserves between Temasek and GIC that could theoretically roll off without much trouble if companies liquidated some of their positions (and the government was given a mandate to withdraw this excessive amount of money, of course). But even in this fantasy scenario, there is a problem – since these investments are held in foreign currencies, they would first have to be exchanged for the Singapore dollar, which greatly affected the exchange rate (since the funds would liquidate foreign assets).
As you can see, it is not so easy to take and spend hundreds of billions – which is why stability is back in shape NIRC (contribution to return on net investment) flowing into the budget each year (amounting to about $ 20 billion) are a much more sensible way to use Singapore’s growing reserve money cushion, without disrupting anything else in the process (and ensuring that these returns gradually increase over time).
But there is another way Singaporeans can benefit from the GIC – and that is learning from its prudent management. So here’s a look at some of his investments made last year, as it was the most active fund in the world, with over $ 17.7 billion ($ 24) allocated in the 2020 calendar.
GIC investments in 2020
Where did the premier Singapore investment corporation put its roles during the pandemic? Here are a few 65 contracts he signed in 2020.
Along with Temasek, GIC is one of the largest investors in technology.
GIC was the largest investor in the data center sector, providing nearly a third of the investment. Most of it was dedicated to a joint investment of 1 billion US dollars Equinix develop and operate high-scale data centers in Japan to support the work goal deployment needs of a target group of hyper-scale companies, including the world’s largest cloud service providers. The venture arose from a similar agreement signed in 2019 by partners for hyperactive data centers in Europe, indicating a long-term partnership in the sector.
Global SWF report
This business has since expanded, with a promise of $ 3.9 billion Equinix and GIC for global expansion to 32 data centers.
In India, she made deals with and around her Reliance Retail, a subsidiary of Reliance Industries – India’s most valuable company run by India’s (and Asia’s) richest man, Mukesh Ambani. Together with TPG (formerly Texas Pacific Group) put $ 1 billion into retail in the fall of 2020.
In a parallel investment, led by Canadian Brookfield and the British Columbia Pension Fund, GIC bought its telecommunications tower operator from Reliance, Tower Infra Trust, for a total of $ 3.4 billion (with GIC taking a 55 percent stake).
And, in collaboration with SAFE, put $ 670 million into India’s leading mortgage lender and the largest privately owned bank HDFC.
On Chinese soil, GIC has remained one of the largest investors in real estate purchases LG Twin Towers in Beijing (pictured above) and another 1.1 million-square-foot office building in the capital, along with real estate manager AEW. With Yanlord, a Chinese real estate developer from Singapore, GIC has taken a 49 percent stake in a joint venture of $ 1.46 billion to develop integrated commercial / residential real estate in China. He joined CITIC in its logistics assets fund and in strategic investment in Xugong Group special machinery. And a share in the Ming Yuan Cloud Group gives it a share in the real estate software market as well.
With Temasek, he invested in running EdTech Yuanfudao, which was worth over $ 15 billion last year – although this particular deal could get bad after Beijing’s crackdown on tutoring companies (it can’t win everything). But, perhaps, his stake in Aixuexi, which specializes in STEM education and uses cloud AI and the Internet of Things, will bring better results.
This is in addition to other offers for GigaDevice Semiconductor (manufacturer of flash memory chips) and IPOs Yihai Kerry Arawana (food processing company) and bottled water manufacturer Nongfu Spring’s, Launching $ 1.1 billion on the stock market.
In the UAE, Singapore’s leading SWF participated in one of the largest infrastructure investments, gaining – in a consortium with several international partners – a 49 per cent stake in Abu Dhabi National Oil Company pipeline funds, worth $ 10 billion.
In Australia, with a list of Hong Kong ESR Cayman, GIC has acquired a $ 4 billion real estate portfolio. In California, she led a $ 353 million funding round Apeel Sciences, which creates food waste solutions and $ 500 million Confirm, a fintech startup in San Francisco started by PayPal co-founder Max Levchin (offers deferred e-commerce payments in installments).
With an average of about five contracts totaling $ 2 billion per month, GIC was the most active government investor (SIO) in the world in 2020.
Although we certainly cannot judge a company by its one-year performance (which is why it does not report on it itself), its long-term consistency has made it one of the most successful SIOs in the world.
Even today, decades of prudent financial management have proved valuable during the worst pandemic of the century, increasing Singapore’s financial cushion unlike any other time in the past.
Highlight credit: Bloomberg