13-03-2014, 08:32 AM
GIC outlines investment principles
S'pore sovereign wealth fund uses 'heat map' to track global markets
Published on Mar 13, 2014
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GIC's Mr Lim Chow Kiat speaking at yesterday's conference. Among the fund's five principles is maintaining price discipline. -- PHOTO: LIANHE ZAOBAO
By Mok Fei Fei
GIC has offered insights into the five guiding principles it uses to ensure its investments achieve the best long-term returns for Singapore.
The sovereign wealth fund also said it uses a "heat map" of the globe monitoring the way various markets are performing by using different colours on the map.
The insights were offered by GIC's chief investment officer, Mr Lim Chow Kiat, when he spoke yesterday at the Investment Management Association of Singapore annual conference at Raffles City Convention Centre.
Even though there may be "short-term temptations", GIC's mission to safeguard and enhance the nation's reserves for the long haul is never forgotten, he noted.
GIC's manages more than US$100 billion (S$126.6 billion) of Singapore's foreign reserves.
Mr Lim pointed out that chief among the five principles is maintaining price and value discipline, by not paying too much beyond what the asset is worth.
"We take the view that the market would provide you with entry or exit opportunities and we do not act until we have those types of gaps existing."
Practising long-term investing is GIC's second key principle.
He said GIC has a minimum time horizon of five years, with a long-term view of 20 years. This view enables GIC to track how the short-term performance measures up to its projected returns.
Deviations from the expected returns can then be analysed to check if the blips are the result of market sentiment or fundamental changes to the asset.
Investment managers can then check whether GIC can meet its long-term objective of achieving a good return over inflation and to decide if the original strategy can be still be pursued.
The third principle is focusing on its strengths such as being able to hire external managers to help it generate additional returns.
Keeping a close eye on risks is the fourth principle for GIC, and it is not just the risks posed by changes in the prices of the asset, but political and reputational risks posed as well.
The fifth principle has to do with being prepared for the future, going through different scenarios that may affect the asset.
The hot markets on GIC's heat map now include developed markets, especially in the credit segment, though questions remain as to whether gains are sustainable.
"Away from the developed world, in the developing world, the map is a lot colder," he said.
But opportunities remain in emerging markets, which are seeing positive trends, such as increasing demand, said Mr Lim.
Singapore Management University associate professor of finance Annie Koh said GIC's investment principles showed it is being prudent and accountable in managing the wealth of the nation.
"If you look at cycles, they are always erratic... and if you keep trying to chase and market-time, you will never get it right perfectly, so I think the discipline behind the approach is what gives us a lot of confidence," she said.
feimok@sph.com.sg
S'pore sovereign wealth fund uses 'heat map' to track global markets
Published on Mar 13, 2014
newspostPurchase this article for republication
photobankBuy SPH photos
GIC's Mr Lim Chow Kiat speaking at yesterday's conference. Among the fund's five principles is maintaining price discipline. -- PHOTO: LIANHE ZAOBAO
By Mok Fei Fei
GIC has offered insights into the five guiding principles it uses to ensure its investments achieve the best long-term returns for Singapore.
The sovereign wealth fund also said it uses a "heat map" of the globe monitoring the way various markets are performing by using different colours on the map.
The insights were offered by GIC's chief investment officer, Mr Lim Chow Kiat, when he spoke yesterday at the Investment Management Association of Singapore annual conference at Raffles City Convention Centre.
Even though there may be "short-term temptations", GIC's mission to safeguard and enhance the nation's reserves for the long haul is never forgotten, he noted.
GIC's manages more than US$100 billion (S$126.6 billion) of Singapore's foreign reserves.
Mr Lim pointed out that chief among the five principles is maintaining price and value discipline, by not paying too much beyond what the asset is worth.
"We take the view that the market would provide you with entry or exit opportunities and we do not act until we have those types of gaps existing."
Practising long-term investing is GIC's second key principle.
He said GIC has a minimum time horizon of five years, with a long-term view of 20 years. This view enables GIC to track how the short-term performance measures up to its projected returns.
Deviations from the expected returns can then be analysed to check if the blips are the result of market sentiment or fundamental changes to the asset.
Investment managers can then check whether GIC can meet its long-term objective of achieving a good return over inflation and to decide if the original strategy can be still be pursued.
The third principle is focusing on its strengths such as being able to hire external managers to help it generate additional returns.
Keeping a close eye on risks is the fourth principle for GIC, and it is not just the risks posed by changes in the prices of the asset, but political and reputational risks posed as well.
The fifth principle has to do with being prepared for the future, going through different scenarios that may affect the asset.
The hot markets on GIC's heat map now include developed markets, especially in the credit segment, though questions remain as to whether gains are sustainable.
"Away from the developed world, in the developing world, the map is a lot colder," he said.
But opportunities remain in emerging markets, which are seeing positive trends, such as increasing demand, said Mr Lim.
Singapore Management University associate professor of finance Annie Koh said GIC's investment principles showed it is being prudent and accountable in managing the wealth of the nation.
"If you look at cycles, they are always erratic... and if you keep trying to chase and market-time, you will never get it right perfectly, so I think the discipline behind the approach is what gives us a lot of confidence," she said.
feimok@sph.com.sg
