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Last month I covered Temasek, now is the time to take a closer look at his big brother. Singapore’s sovereign wealth fund GIC released its annual report in July but, as always, the numbers are not complete as some remain hidden.
Officially, GIC does not report total assets under management or one-year rates of return (which is understandable, of course, given its long-term investment horizon). Nonetheless, independent analysts provide estimates of both the performance and the value of its portfolio.
Global SWF, a 3-year-old platform that tracks sovereign wealth and pension funds founded by a former global director of PWC and COO of the SWF practice at PwC, has calculated that GIC results have reached a record high of 37.5 percent in the past year ending March 31, outperforming even the generally more aggressive Temasek who returned 24.5 percent.
Their estimates also put the total assets under management figure at US $ 744 billion, or just over S $ 1 trillion, for the first time in GIC’s history.
This especially occurs after a few years of stable fund performance, as shown in the graph below (the figures are in US dollars). Turns out the pandemic was pretty good for business.
Singapore continues to get richer thanks to COVID-19
As I explored a few weeks ago, the global Covid-19 crisis has actually enriched the cautious city-state by a few hundred billion dollars, due to stock market rallies around the world (a result of the stimulus measures fiscal and monetary triggered to combat the economic crisis). virus-induced crisis) coupled with a sharp increase in demand for the Singaporean dollar.
As it turns out, my previous estimates of the over S $ 200 billion Singapore likely earned over the past year have been rather conservative. If the above figures are correct, the exact figure easily exceeds S $ 400 billion, given the S $ 260 billion increase in the value of GIC’s holdings, in addition to the S $ 181 billion earned through to a combination of growing foreign exchange reserves and Temasek’s portfolio – even after subtracting the government’s Covid-19 support packages, which will amount to approx. S $ 54 billion by the end of this year.
It’s time to go shopping
Considering these mind-boggling amounts, you might be thinking now – “Great! What can we spend it all on? But the answer is, unfortunately – “not much”. Here’s why:
Singapore’s foreign exchange reserves protect exchange rates and are not meant to be used liberally. Sometimes certain amounts are transferred to GIC for a more profitable investment, but overall billions of dollars at MAS are held in cash to ensure that SGD is neither very strong nor very weak.
Billions at Temasek are invested in stocks – some of which can be quite liquid but are generally long-term investments. A quarter of its portfolio is tied up in Singapore and in critical companies like Singapore Airlines. In addition, around 45 percent is in unlisted assets that would be difficult to liquidate.
Finally, there is GIC, which indirectly manages the money of the central provident fund (CPF), as the proceeds from the sale of special bonds protecting your CPF savings are transferred to it for investment.
Current CPF balances be at S $ 485 billion – almost half of total GIC assets. The S $ 500 billion remaining on the trillion dollar stack would technically be part of the national reserves, but the company must maintain a healthy reserve, assuming that future economic crises could erode the value of its portfolio (as million Singaporeans remain legally entitled to regular returns from their CPF).
Its main role is not to invest aggressively but rather to maintain a fairly low risk profile, with an above-average return over a period of several decades.
In theory, between Temasek and GIC, there could be between S $ 200 billion and S $ 300 billion in reserves that could theoretically be unwound without much hassle, if the companies liquidated some of their positions (and the government was mandated to withdraw this exorbitant sum, of course). But even in this fantastic scenario, there is a problem – as these investments are held in foreign currencies, they would first have to be exchanged for the Singapore dollar, massively influencing exchange rates (since the funds would be liquidating. foreign assets).
As you can see, it’s not that easy to take and spend hundreds of billions – that’s why the stable returns in the form of Net Investment Returns Contribution (NIRC) that pour into the budget every year (at the height of around S $ 20 billion) are a much more reasonable way to use Singapore’s growing cushion of reserve currency, without disrupting anything else in the process (and ensuring that those returns increase gradually over time).
But there is another way Singaporeans can benefit from GIC – and that is by learning from its careful management. So here is a look at some of its investments made over the past year, as it is the most active fund in the world, with over US $ 17.7 billion (S $ 24) deployed over the past year. calendar year 2020.
GIC Investments in 2020
Where did Singapore’s top investment firm place its bets during the pandemic? Here are a handful of the 65 deals he made in 2020.
Along with Temasek, GIC is one of the biggest investors in technology.
GIC was the largest investor in the data center industry, providing almost a third of the investment. Much of it went to a billion-dollar joint venture with Equinix develop and operate hyperscale data centers in Japan to meet the workload deployment needs of a targeted group of hyperscale businesses, including the world’s largest cloud service providers. The company follows a similar agreement signed in 2019 by partners for hyperscale data centers in Europe, indicating a long-term partnership in the industry.
World report on sovereign wealth funds
That deal has since been extended, with an additional $ 3.9 billion pledged by Equinix and GIC to expand to 32 data centers around the world.
In India, he has made deals with and around Retail business, a subsidiary of Reliance Industries – the most valuable Indian company run by the richest man in India (and Asia), Mukesh Ambani. Together with TPG (formerly Texas Pacific Group), it injected US $ 1 billion into retail in fall 2020.
In a parallel investment, led by Canadian Brookfield and the British Columbia Pension Fund, GIC acquired its telecommunications tower operator from Reliance, Infra Trust Tower, for a combined amount of $ 3.4 billion (with GIC taking a 55 percent stake).
And, in collaboration with SAFE, he invested $ 670 million in India’s leading mortgage lender and largest HDFC private bank.
On Chinese soil, GIC remained one of the leading investors in real estate, buying LG Twin Towers in Beijing (pictured above) and another 1.1 million square foot office building in the capital, with an AEW property manager. With Yanlord, a Singapore-listed Chinese real estate developer, GIC took a 49 percent stake in a S $ 1.46 billion joint venture to develop integrated commercial / residential properties in China. He joined CITIC in its logistics real estate fund and in a strategic investment in Xugong Group Construction Machinery. And a stake in Ming Yuan Cloud Group also gives it a share of the real estate software market.
With Temasek he invested in an EdTech startup Yuanfudao, which was worth over $ 15 billion last year – although this particular deal may turn sour after Beijing’s crackdown on tutoring companies (can’t win it all). But, perhaps, his participation in Aixuexi, which specializes in STEM education and leverages AI from cloud computing and the Internet of Things, will yield better results.
This is in addition to its other offers in GigaDevice Semiconductor (maker of flash memory chips) and IPOs of Yihai Kerry Arawana (a food processing company) and manufacturer of bottled water Nongfu Spring, Launch of $ 1.1 billion on the stock market.
In the United Arab Emirates, Singapore’s largest sovereign wealth fund has participated in one of the largest infrastructure investments, acquiring – in a consortium with several international partners – a 49 percent stake in Abu Dhabi National Oil Company pipeline assets, worth $ 10 billion.
In Australia, with Hong Kong listed ESR Cayman, GIC has acquired a real estate portfolio of S $ 4 billion. In California, he led a $ 353 million funding round for Apeel Sciences, which creates solutions for food waste and a $ 500 million round by To affirm, a San Francisco fintech start-up started by PayPal co-founder Max Levchin (offering delayed e-commerce payments by installments).
With an average of around five transactions totaling S $ 2 billion per month, GIC was the most active public investor in the world in 2020.
While we certainly can’t judge the company on a single year of performance (which is why it doesn’t report it itself), its long-term consistency has made it one of the most successful SIOs in the world. .
And, today, decades of prudent financial management have proven their worth during the worst pandemic in a century, increasing Singapore’s financial cushion like at no time in the past.
Featured Image Credit: Bloomberg
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