GIC explains why it remains under-invested in real estate

SINGAPORE'S sovereign wealth fund GIC is trying to raise its allocation to real estate from about 7 per cent of its portfolio to its targeted 9-13 per cent. Its difficulty, however, lies in the high asset values around the world currently.

The chief investment officer of GIC Real Estate, Lee Kok Sun, was asked by an audience member at the Asia Pacific Real Estate Association (APREA)'s AsiaPac Property Leaders Summit on Tuesday why GIC continues to remain under-invested in the real estate asset class.

He replied: "That's just a reflection of the market because asset values are at an escalated level. Given the size of the assets that we manage, it's just difficult to move the needle.

"At the same time we are also selling, because again it's a reflection of the market. Being a disciplined investor, if we see that the values are above the intrinsic level, we should be selling."

It has been selling a lot of its "high volatility assets" such as hotels, industrial properties and other non-core investments, he said.

"At the same time that we are selling, we are also trying to raise the allocation. It's like running on a treadmill and we have to run faster and faster. I think that is really the big challenge that we face."

The Sovereign Wealth Centre puts GIC's assets under management at about US$353.6 billion.

As at March 31, 2016, real estate made up 7 per cent of the GIC portfolio's asset mix, unchanged from a year ago.