GIC to eye more 'granular' investment opportunities
It says broad market returns have been helpful historically, but current economic climate is nudging it towards 'micro investments' arising from tech transformation, sustainability
Claudia Tan HS
Singapore
PANDEMIC uncertainty, lofty asset valuations and inflation fears have prompted GIC to wean itself off its reliance on broad market returns. It will instead pursue compelling, recurring opportunities in areas of technological transformation and sustainability - which it will do through partnerships and its investment capabilities in the private market space.
This change comes as the sovereign wealth fund marks its 40th anniversary, with the upcoming decade set to be a period of "regeneration". Its chief executive officer Lim Chow Kiat told reporters at a briefing that this will be a time to pivot for the future and build on capabilities to deal with fresh challenges.
He said that while broad market returns have historically been helpful, the many divergences amid the current economic climate come with more pockets of risks and returns.
GIC therefore has to "get more granular" and seek out attractive bottom-up investment opportunities, he said.
To do so, GIC is looking to boost its private market capabilities and global network of partners to tap "micro investments" arising from long-term trends of technology transformation and sustainability.
Group chief investment officer Jeffrey Jaensubhakij said: "One of the ways in which we think we can be most effective in terms of our micro positive investment is really focused around private market investing."
GIC currently has about 400 investment professionals across 10 offices, focused on private market investing in real estate, private equity and infrastructure.
Its "breadth of coverage" and the "ability to dig deeper" will hopefully enable GIC to uncover opportunities sooner, said Dr Jaensubhakij.
GIC's position as a long-term investor also gives it an edge over others when it comes to seizing investment opportunities.
He said: "The fact that we are more long-term means that when things get too expensive, we are not forced to chase after expensive, low-return investments."
GIC is also able to partner firms from the start till they go public and even after their initial public offering (IPO).
It has, for instance, remained invested in Philippine-based food and beverages company Monde Nissin Corporation (MNC) since it started out as a private company.
GIC was subsequently among the 11 cornerstone investors in the 48.6 billion peso (S$1.35 billion) blockbuster IPO of MNC, the largest IPO in the Philippines.
Separately, GIC has been invested in Brazil-headquartered hospitality chain Rede D'or since 2015, and remained committed to the company post-IPO in December 2020.
GIC on Friday announced a 4.3 per cent annualised rolling 20-year real rate of return - the highest since 2015. That said, increasing asset valuations could mean lower future returns.
"That's why we are concentrating so hard on these micro opportunities, because even if the broad range of assets are not likely to do that well, there will still be smaller niche pieces that have very good opportunities," said Dr Jaensubhakij.
Close partnerships - either with portfolio companies, funds or general partners - had led to more micro investment opportunities against the uncertain macro environment.
GIC's global network and connectivity means that it can help connect its partners and portfolio companies for them to gain exposure to technologies outside their own geographies, said Dr Jaensubhakij.
The Bridge Forum platform, for instance, connects innovative companies with GIC's global network of corporate leaders for potential business opportunities.
Technological transformation will drive changes in many industries, resulting in lower costs and increased productivity, he said.
Sustainability, too, remains a strong focus for GIC, given the mounting pressure for companies to address climate change and its risks.
Mr Lim said that GIC strongly believes in supporting companies in their transition towards long-term sustainability, rather than to mechanically divest from certain industry sectors as that would mean passing the "problem to another investor".
Investing in transition efforts using a bottom-up approach enables GIC to engage and cater to the different needs at the individual asset level.
It has invested in India-based renewable company Greenko and introduced it to air products and chemicals so it can explore ways to further decarbonise India's economy.
READ MORE:
