GIC adopts dynamic asset allocation

The Government of Singapore Investment Corporation (GIC) has made changes to its investment policy introducing a ‘facility for medium-term strategy with regard to asset allocation’, as its allocation to developed market equities increase from 28 to 41 per cent in the past financial year.The GIC, which has more than $100 billion invested primarily outside of Singapore, will be able to make departures from the policy portfolio for the first time.

In its end of financial year report it says: the medium-term strategy facility will enable GIC management, with approval of the board, to make calibrated departures from the policy portfolio.

“The policy portfolio is an anchor of GIC’s investment process for allocating and rebalancing exposures to various asset classes. In this way, GIC can respond more flexibly to significant risks or opportunities, which are likely to emerge from time to time in an environment of greater uncertainty.”

Its other key strategic investment decision is to continue to allocate more to the emerging economies, especially in Asia. This is a deliberate progression of a strategy that began in 2003 when GIC focused on emerging market equities as an asset class in its own right.

In the last quarter of this year the GIC, which employs more than 1,000 people, will open its ninth office in Mumbai.

At the beginning of July this year, several senior appointments were made: Lim Kee Chong, Goh Kok Huat, and Tay Lim Hock were appointed deputy presidents of the public markets, real estate and special investments groups respectively. Chia Tai Tee assumed the appointment of deputy chief risk officer. Jeffrey Jaensubhakij and Ho Nyuk Chong were appointed managing directors.

In the past financial year the GIC made a significant change to the asset allocation strategy which saw the repurchase of developed market equities resulting in an allocation increase from 28 to 41 per cent. Investments in fixed income and cash fell from 32 to 24 per cent as a result.

Previously, from July 2007 to September 2008 GIC de-risked the portfolio, selling developed market equities.

Asset allocation to financial year March 2010

asset class March 2010 March 2009
public equities
developed markets 41% 28%
emerging markets 10 10
fixed income
nominal bonds 17 19
inflation-linked bonds 3 5
real estate 9 12
PE, VC, infrastructure 10 11
absolute return 3 3
natural resources 3 4
cash and others 4 8