GIC ups US equities allocation despite valuation worries

Singaporean sovereign wealth fund GIC boosted its US equities allocation in the year to March 2025 despite the expectation that high valuations could “provide a challenging backdrop for forward returns”.  

The equities allocation, which comprises public and private investments, now accounts for 51 per cent of the portfolio, up from 46 per cent in 2024, according to GIC’s annual report released on Friday.  

Fixed income makes up 26 per cent of the asset allocation, and real assets represent 23 per cent.  

The state investor now has an estimated $936 billion in assets under management, according to Global SWF, which also noted that GIC’s reporting has grown more opaque, now lacking specific asset class mix disclosures. 

The fund previously reported US exposure as a standalone category but now it’s grouped under ‘Americas’, which is the biggest geographical exposure (49 per cent) and up from 44 per cent in 2024.  

Despite its huge commitment, GIC questioned whether some companies in the US markets will be able to achieve the earnings growth implied by their high starting valuation.  

“A more challenging growth outlook weighs on their prospects. In this environment, our public equities teams are focusing on high-quality companies that can compound in value over the long term,” the annual report read.  

Since US President Donald Trump’s Liberation Day announcements, two schools of thought on the role of US assets in portfolios have emerged among allocators. Some are ready to slow the speed of capital commitment or set a limit of US exposure to manage risks, including Australia’s Future Fund and Canada’s IMCO.  

Others like Singapore’s Temasek stood firm on its position that it will keep funnelling capital into the US due to the depth and maturity of its markets, unless some extraordinary event – which it cannot foresee – forces it to pull back.   

But most allocators are no doubt carefully assessing the outlook. While uncertainties sparked by US policy changes around tariffs, immigration and government spending can lead to higher inflation and the probability of recession, GIC said “these worries are balanced by healthy private sector balance sheets, while in aggregate imbalances remain moderate”. 

“These will not just impact financial markets, but also hurt corporates who will need larger buffers to absorb these shocks. The result will be a less efficient and more costly trading system,” GIC said.  

GIC was established in 1981 to manage Singapore’s foreign reserves and it invests in international assets only. Its exposure elsewhere in the world includes 24 per cent Asia Pacific, 20 per cent in Europe, the Middle East and Africa and 7 per cent for the rest of the globe.  

In fixed income, “the low estimates of term premia indicate that medium-term around both inflation and deteriorating fiscal dynamics have not been fully priced in,” the fund said. 

It sees opportunities in real estate as valuations appear to be bottoming, while in infrastructure it is keeping an eye on themes such as digitisation, climate transition and emerging economy development.  

GIC doesn’t report on annual returns but the annualised USD nominal return for the past 20-year period came to 5.7 per cent as of March 2025.  

It employs a total portfolio approach with a reference portfolio that comprises 65 per cent global equities and 35 per cent global bonds, representing the fund’s risk tolerance. The reference portfolio’s 20-year annualised return is 6.2 per cent. 

GIC has kept the actual portfolio to a lower volatility than the reference portfolio over 20, 10, and five-year periods, which it attributed to asset diversification and “pre-emptive measures to lower portfolio risk” in recent years.  

Deputy group chief investment officer Bryan Yeo took over the top investment job from long-time CIO Jeffrey Jaensubhakij this April, who stepped down after almost a decade in the role. It has almost 2,400 employees across 11 offices around the globe.  

This article has been edited to clarify the rate of return and assets included in the fixed income asset class.