Government of Singapore Investment Corp., which manages more than $100 billion of reserves, said it stopped publishing its nominal returns in the local currency because they should be compared with global benchmarks.
The annual report should focus on GIC’s primary mandate of achieving its so-called real rate of return, or subtracting the global inflation rate from the nominal performance, according to Josephine Teo, minister of state for finance. The fund stopped publishing the nominal rate of return converted to Singapore dollars three years ago, she said.
“The use of U.S. dollars when showing nominal returns avoids confusion when comparisons are made with other fund managers or global market indices,” she said in Parliament today in response to a lawmaker’s query. “The portfolio’s real return is the same regardless of the currency used for the calculation. The nominal return and global inflation has to be expressed in the same currency for computation.”
GIC said last year its 20-year annualized real return was 3.9 percent as of March 2012, unchanged from the previous year. That meant the government’s fund manager generated that return over the past two decades on top of the global inflation rate, she said.
“This measure reflects GIC’s mandate, which is to preserve and enhance the international purchasing power of our reserves over the long term,” she said.
The annualized nominal rate of return in U.S. dollar terms was 3.4 percent over 5 years, 7.6 percent over 10 years and 6.8 percent over 20 years, GIC said in July. The fund doesn’t report an annual return or disclose the actual size of its portfolio.
The fund also boosted its cash in the year ended March 2012 to levels exceeding the 2008 global financial crisis as it pared stocks and bonds, reducing its holdings in Europe. Cash allocation almost quadrupled to 11 percent of its portfolio, while stocks fell to 45 percent from 49 percent as it pared equities in developed markets. Bonds dropped to 17 percent from 22 percent, according to GIC.
About 80 percent of GIC’s assets are managed internally, according to Ng Kok Song, who retired as the fund’s chief investment officer in January and serves as an adviser now. Too much transparency may limit the fund’s ability to maneuver its investments, Ng, who had invested the nation’s foreign reserves for more than four decades, said at the IMAS conference in Singapore.
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