Thursday, August 13, 2015

Singapore’s sovereign-wealth fund has warned that it expects lower returns over the next five to ten years

Singapore’s sovereign-wealth fund, one of the world’s biggest and most sophisticated investors, has warned that it expects lower returns over the next five to ten years because global economic growth and earnings don’t look promising.

GIC Pte Ltd., whose largest investments are in North America, said ultralow interest rates have inflated asset prices in developed markets. It said opportunities remained in developed and emerging markets, although it cut its exposure to Europe during Q12015.

“The fall in interest rates to historic lows in most advanced economies has caused prices of a broad range of asset classes to rise,” Lim Chow Kiat, GIC’s group president and chief investment officer, said in the fund’s annual report for the fiscal year that ended in March. “The sharp rise of asset prices, when the global economy is still struggling to gain a firm foothold, makes the investment environment particularly uncertain and unpredictable.”

Even China, which has faced waves of heavy selling in stocks in the past month, remains a long-term investment destination for the fund, GIC said. The fund said it still has a positive view on the economy and believed in the ability of the government to carry out overhauls. Recent volatility is ”fallout of rampant market speculation,” Mr. Lim said.

“China in the last three years has demonstrated its seriousness to reforms and we believe that the country’s future is good," he said.

GIC publishes its annual report following a lengthy audit process. The sovereign-wealth fund is a major global player, and its investments are closely watched. The fund said its investments globally gave it a 4.9% 20-year real rate of return for the fiscal year that ended March 31, or a 6.1% return over the same period in U.S. dollar terms.

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