Investors should diversify: GIC chief
Options needed amid global uncertainties and trade tensions: Lim Chow Kiat
These uncertain times mean investors should ensure they have a range of options, including keeping some cash as "dry powder" for more immediate needs, said GIC chief executive Lim Chow Kiat.
Mr Lim's remarks yesterday came as he outlined the sovereign wealth fund's strategy for what are challenging times.
The fund's annual report noted in July that it had adopted a more defensive stance amid slowing global growth and uncertainties from trade tensions.
Its cash and bonds allocation stood at 39 per cent as at March 31 - the highest since it adopted its latest investment framework in 2013.
GIC is also expanding its networks of partners and investee companies, noted Mr Lim, who was speaking at the annual GIC Insights forum, where global business leaders discuss issues pertinent to the business and investment community.
He said at the forum that investors are "hard put to find their footing", with the world at a turning point and the geopolitical mood souring amid rising populism, societal divisions and trade protectionism.
"They face rising uncertainty but falling returns," he added, noting that uncertainty over economic prospects is the highest on record now. Policymakers also seem to have limited ammunition to reflate economies, and interest rates are already at depressed levels.
Negative-yielding bonds are no longer a "market oddity", he noted.
They accounted for a third of global tradable bonds as at mid-August - a valuation of US$17 trillion (S$23 trillion) - based on data from the Bloomberg Barclays Global Aggregate Bond index.
"Faced with potential opportunity costs of missing out on positive returns, investors have also been moving into more risky assets," he said. "It is a quandary."
But there remain bright spots, with breakthroughs in technologies such as artificial intelligence, 5G and blockchain creating new industries.
"This is also where we already find the middle ground, between technology and traditional companies," he said.
"The convergence of their business models is producing many interesting investment opportunities."
Mr Lim added that GIC's investment strategy emphasises diversification. It looks beyond economic cycles as well.
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