Invested in the long term

Business Times

31-07-2025

IN 2025, as Singapore marks 60 years of independence, we are reminded of GIC's founding mandate: to invest the reserves entrusted to us for the benefit of current and future generations of Singaporeans. Now that responsibility is more vital than ever.
The forces shaping today's investment environment go beyond any market cycle or structural trend. They strike at the foundations of the global order. They are rewriting the rules of global investing.
Our response relies on two pillars: top-down portfolio construction and bottom-up asset selection. We diversify with intent, deploy with granularity, act with agility, and invest in partnerships, always taking the long view, protecting against permanent impairment, and preparing rather than predicting.
Performance
For the 20-year period from Apr 1, 2005, to Mar 31, 2025, the annualised US dollar nominal return of our portfolio was 5.7 per cent. Adjusting for global inflation, the annualised 20-year real return was 3.8 per cent. Our long-term returns remained stable, though in recent years a confluence of factors have affected this performance, which we detail in the Investment Report.
A world in flux
Cyclical shifts in growth, inflation and interest rates continue to influence markets. However, these cycles now produce a wider cone of outcomes and interact with deeper, longer-term forces playing out over years rather than quarters.
We group these forces into two categories: structural and foundational. Structural shifts evolve within the existing system; they can often be analysed and prepared for. Foundational shifts, by contrast, fundamentally transform the system itself, challenging long-held assumptions and requiring a basic rethinking of portfolio construction and investment management.
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Structural shifts include rising public debt, demographic changes, growing global imbalances between savings and spending, and widening gaps in technology adoption. These are already altering capital flows across borders, weighing on productivity in some regions and influencing long-term returns.
Foundational shifts go even deeper, redefining the post-war world order once based on free trade, capital mobility, and institutional trust. Long-standing assumptions about safe havens, liquidity and asset correlation are being challenged. Politics and geopolitics now influence economies and financial markets directly and immediately.
In an increasingly more volatile and fragmented trade system, policy decisions can quickly reverse advantages. Similar fragmentation is unfolding in capital markets. Financial systems are dividing along geopolitical fault lines, complicating cross-border investing.
Finally, artificial intelligence (AI) and the climate transition are also unfolding in ways that signal not only long-term transformation, but also foundational change, reshaping how economies function, how capital is deployed and how future value will be created.
Investment approach
Faced with these profound changes, it is tempting to chase the short-term hype or retreat in the face of the unknown. At GIC, we do neither. We focus on long-term value, with an emphasis on avoiding permanent loss. We apply 'inversion' – studying the typical causes of permanent impairment in order to steer clear of them. Historically, such losses have stemmed from poor fundamentals, disposals due to an inability to service debts, exogenous shocks or even fraud. Our investment process is designed to guard against such pitfalls.
Less obvious but equally damaging is overpaying. Situations such as the Nikkei bubble in the late 1980s, the Nasdaq collapse in the early 2000s, and the periodic bursting of meme stock bubbles all illustrate the dangers of valuation overshoot. Even if asset prices eventually recover, the time lost will have been too great. This is why we remain disciplined on price.
From the top down, we focus on harvesting long-term risk premia in a diversified manner – building a resilient and flexible portfolio that can withstand market stresses, adapt across cycles and long-term shifts and compound value over time. While concentrated markets can make diversification feel costly in the short term, it remains essential to long-term portfolio resilience. GIC diversifies across asset classes, geographies, sectors and time. For example, in private markets, we spread investments across multiple years – known as time or vintage year diversification – to avoid overexposure to any single time period.
Amid unprecedented shifts, we also need granularity and agility. Within broad themes such as AI or climate, opportunities vary widely across value chains. We need to break these down into investible segments. For instance, in AI, we distinguish between enablers such as chipmakers or data centre providers, monetisers like cloud platforms and software companies, and adopters integrating AI into their operations. This enables our investments to be more targeted.
Similarly, in climate, we recognise long-term opportunities in electrification, energy efficiency and climate adaptation. However, investments vary in risk profile, policy support and relevance across markets. In the global energy landscape, exponential demand growth and persistent supply disruptions have renewed focus on energy security and affordability. This has resulted in more fragmented investment trends, with each country charting its own path to secure, cost-competitive energy sources.
Agility requires us to act decisively as these trends evolve. In volatile markets, dislocations arise when market participants are forced to buy or sell, creating mispriced assets. By preserving liquidity and flexibility, we can respond when others can't – whether in private credit during bank lending crunches or secondaries where liquidity-seeking investors sell at discounts. We also see agility as the ability to spot underappreciated themes early. Climate adaptation, a vital but historically overlooked part of the climate response, is gaining urgency as physical risks rise. It is becoming both an inevitable need and a complementary investment theme alongside decarbonisation. GIC research estimates that the investment value for a select set of adaptation solutions will grow from US$2 trillion today to US$9 trillion by 2050, with US$3 trillion attributed to incremental growth driven by global warming. This opens up opportunities across both established solutions, including weather-resilient building materials and emerging technologies such as weather intelligence.
Partnerships
At GIC, we believe that navigating uncertainty requires deep, robust collaboration. We invest in relationships as we do in assets – for the long term. Our global presence across more than 40 markets reinforces this commitment, providing on-the-ground insights and the continuity needed to build trusted, lasting partnerships.
AI capabilities
One area demanding concerted effort and commitment across the organisation is technology integration. Like many, GIC is actively building its AI capabilities. In internal audit, for instance, we leverage AI to detect anomalies in both structured and unstructured data, automating the analysis of large and diverse data sets to identify risk trends and focus areas.
We are also integrating AI more deeply into our investment process. Drawing from more than 40 years of investment data, we are developing prototypes such as a virtual investment committee member, which taps into GIC's institutional knowledge to generate probing questions, challenge assumptions, and surface contrarian insights in real time.
Looking ahead
The year 2025 may be a turning point in markets – and in history. As the investment world grows more complex, our responsibility to steward Singapore's reserves – with integrity and foresight – remains our guiding purpose.
The writer is chief executive officer of GIC. This is adapted from his Letter from the CEO, the opening chapter in GIC's 2024/25 report.