GIC ‘global equities’ reference portfolio, but historical comparison narrative is ‘US equities’?


Suggest that GIC use its ‘Global equities and bonds’ reference portfolio, in its historical comparison narrative, instead of a ‘US equities and bonds’ portfolio’

I refer to the article “GIC’s shrinking returns add to Singapore’s gloom” (Reuters, Jul 10, 2017).

It states that “GIC’s shrinking returns are adding gloom to Singapore. The sovereign wealth fund, which manages an estimated $343 billion of assets, has delivered its worst annual performance since 2001 barring the financial crisis. The outlook is depressing too. The challenges of investing overseas compound the mood at home as the city’s first family feud in an ugly public squabble.

Stripping out inflation, the wealth fund reported a 20-year annualised real return of 3.7 percent, compared to a rolling return of 4 percent last year. Including inflation does not improve the picture. Average nominal returns also underperformed GIC’s own reference portfolio, which comprises 65 percent global equities and 35 percent global bonds.”

In this connection, according to GIC’s latest Investment Report – “Investment returns are inherently cyclical and volatile even
over 20 years. For example, the 20-year real return for a
US 65% equity and 35% bonds portfolio was below 2% in
the 1980s, but as high as 10% in 2000. The average 20-year
return was 5.1% over the period from 1900 to 2018.”

Please note for a moment now, that the above ‘historical comparison’ narrative is between GIC’s returns and a ‘US equities and bonds’ portfolio.

In contrast, GIC’s reference portfolio is and has always been a ‘Global equities and bonds’ portfolio, since it started using a reference portfolio from 2013.

In this regard, the same report states that

“Table 3 shows the nominal USD returns over 20 years, 10 years and 5 years and the corresponding volatility for the Reference Portfolio. The figures do not include adjustments for costs that would be incurred when investing.

Table 3: Nominal Annualised Return and Volatility of the Reference Portfolio (in USD, for periods ending 31 March 2018)
Reference Portfolio
Time Period Nominal Return6 Volatility7
20-Year 5.7% 10.8%
10-Year 5.2% 12.0%
5-Year 6.9% 7.5%

5 The Reference Portfolio was adopted from 1 April 2013, and reflects the risk that the Government is prepared for GIC to take in its long-term investment strategies. It comprises 65% global equities and 35% global bonds.”

Also, replies in Parliament have also always referred to the reference portfolio –


Parliamentary Reply:

construction of GIC’s portfolio is subject to the Government’s risk preference, which is expressed through a Reference Portfolio[1] made up of 65% global equities and 35% global bonds.”

So, in view of the above, it may be somewhat confusing for Singaporeans and perhaps also Parliamentarians, to make the ‘historical comparison’ narrative, with a ‘US equities and bonds’ portfolio, instead of the reference portfolio.

Of course, as I understand it – the ‘global’ data does not go back 118 years to 1900. But, why not also give the historical comparison for the reference portfolio, for say the last 40 years – after all GIC is only about 37 years old?

Otherwise, Singaporeans may think that it may be akin to an ‘apple to orange’ ‘comparison’ from their perspective – of the best, worst and average ’20-year returns’ historically.

Leong Sze Hian

About the Author

Leong Sze Hian has served as the president of 4 professional bodies, honorary consul of 2 countries, an alumnus of Harvard University, authored 4 books, quoted over 1500 times in the media , has been a radio talkshow host, a newspaper daily columnist, Wharton Fellow, SEACeM Fellow, columnist for theonlinecitizen and Malaysiakini, executive producer of Ilo Ilo (40 international awards), Hotel Mumbai (associate producer), invited to speak more than 200 times in about 40 countries, CIFA advisory board member, founding advisor to the Financial Planning Associations of 2 countries. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.