Wednesday, July 29, 2020

Singapore Wealth Fund Not Doing So Well

From Bloomberg, July 27:
One of the World’s Biggest Investors Warns of More Pain to Come
One of the world’s largest sovereign wealth funds has warned that global markets are set to become even more volatile, adding to pressure on returns amid rising coronavirus infection rates and continued U.S.-China tensions.

GIC Pte executives listed a swathe of unpredictable factors looming large in the minds of investors, from the pandemic’s shutdown of shopping and hospitality venues to bubbly valuations fueled by debt being raised at historically low interest rates.

The bearish comments from GIC add to the growing chorus of caution from other big dealmakers pouring cold water on hopes of a rapid V-shaped recovery. Fitch Ratings Ltd. on Tuesday warned that the economic fallout from Covid-19 could last years due to increased unemployment and reduced company spending.

“The timing and shape of the recovery is highly unclear, partly because of the infection rate,” GIC Chief Executive Officer Lim Chow Kiat said, adding that the slowdown of globalization and impact from government stimulus measures were all complicating factors. “The economy continues to face a lot of headwinds.”

Singapore’s sovereign wealth fund reported a 20-year annualized real return of 2.7% on Tuesday, down from last year’s 3.4% and its worst performance on that metric since 2009 when it lost over one-fifth of its value in a single year. GIC doesn’t release one-year performance figures.
But the firm said it was the dot-com bubble of the late 1990s falling out of its rolling two-decade investment window, rather than March’s market turmoil, that caused most of the decline because it had already turned more defensive. GIC under Lim’s leadership has repeatedly warned of falling returns caused by geopolitical tensions and unstable valuations.

While GIC officially manages “over $100 billion” in assets and declines to provide an exact figure, the Sovereign Wealth Fund Institute estimates its holdings are around $440 billion....