As Long As Financial Assets Remain Cheap, GIC Is A Buyer

HONG KONG - The Government of Singapore Investment Corp. on Tuesday predicted that the global financial crisis has not yet ended, but the Singaporean sovereign wealth fund believes that the present turmoil should provide "very interesting opportunities" to acquire impaired assets.

In its first-ever annual report, released Tuesday, GIC, as the sovereign fund is known for short, said it had achieved an average annual nominal return of 7.8% in U.S. dollar terms over the past 20 financial years through March 2008. The real annual return during that same period was 4.5%.

The report disclosed that the Singaporean state fund had invested 34% of its portfolio in the United States, another 35% in Europe and 23% in Asia. The remaining assets are distributed across the Americas and Australasia.

GIC says it manages well in excess of $100 billion in assets, but many analysts believe the fund is far bigger than that, probably around $300 billion. Breaking down the state fund by nature of investment, a near majority of its portfolio, about 44%, was held as listed shares; fixed-income products contributed about 26%; the remaining 23% was in alternative investments--real estate, hedge funds and other derivatives.

It had been a tradition of GIC, which manages the central bank's reserves, to take a conservative strategy: to buy only minority stakes in companies and to avoid taking a controlling role in any commercial entity. Yet, with more and more Western financial institutions recently putting up assets for urgent sale at cut-rate prices, GIC has not been hesitant to take a more active role. Last year, GIC bought around a 4% stake in Citigroup (nyse: C - news - people ) and about a 9% interest (including convertible notes) in Switzerland’s UBS (nyse: UBS - news - people ).

GIC believes there will be many more chances ahead to pile up cheap assets. "We should not assume that the worst is over, and we continue to be watchful and prudent in our assessment of the economic risks and in our investments," Deputy Chairman and Executive Director Tony Tan of GIC told a news conference on Tuesday.

Group Chief Investment Officer Ng Kok Song said the current credit problems in the United States would present very interesting opportunities in impaired assets. He added that developed economies will continue to be a big part of GIC's portfolio.

--Vivian Wai-yin Kwok, 09.23.08