Stick With Core Values in Uncertain Times Says GIC Chief Executive

Posted on 09/20/2019

In a speech in Singapore, Lim Chow Kiat, CEO of sovereign wealth fund GIC Private Limited, warned that in the current discordant environment institutional investors are finding it increasingly challenging to find their footing. Lim noted that the geopolitical mood has soured. Greater income inequality in OECD countries, rising populism, societal divisions, and trade protectionism, among the principle reasons for the adverse outlook. In an survey conducted in August 2019 – SWFI Global Asset Owner Survey – respondents were asked, ” In the current environment, which potential risk is the greatest toward financial market stability?”

The respondents, which includes a sample of investment executives at sovereign wealth funds, superannuation funds, pensions, and other asset owners, gave geopolitical risk as the greatest, a similar response compared to the June 2019 survey results.

For their part GIC is facing up to the weighty challenges spanning geographies, businesses, and capital markets by adhering to three core guidelines. GIC both has major investments in both the United States and mainland China. According to SWFI transaction data, GIC has extensive exposure to both U.S. and Chinese technology investments and real estate.

Furthermore, according to Lim, the first rule is to cling to GIC’s mandate to preserve and enhance the real value of the national reserves which translates to giving priority to prudence. Lim said the emphasis on diversification, robustness in constructing the GIC portfolio and the discipline to modulate risk exposure as valuations are appraised to be unattractive.

The second principle the CEO emphasized is to focus on long term investing with a mindset of looking over cycles to assess value and to benefit from harvesting long-term risk premia, capitalizing on short-term dislocations. This according to Lim compels the Singaporean sovereign investor to look beyond short-term headlines and to position for robust trends such as the rise of the middle-class in Asia, the innovation engine of the U.S. and Europe’s efforts to be the spearhead for the environmental sustainability efforts.

Thirdly, Lim highlighted GIC’s need to continue forging lasting partnerships and undertaking internal improvement and innovation while also having ‘optionality’. Tactically speaking he said this may include raising some cash as dry powder – something GIC’s peer Temasek Holdings has done. Even though the overriding theme of Lim’s speech was one of caution, he did pay heed to the investment potential technology is currently offering and will continue to release. Artificial intelligence, 5G, blockchain, and the internet of things, will all offer real investment opportunities.

“Technology, for one, offers immense investment possibilities as the pace of innovation here is breath taking,” Lim said.