Singapore sovereign wealth fund GIC Private Ld believes emerging markets now offer better value than developed ones and is particularly interested in exploring increasing investments in their technology sectors, a senior fund executive said.
GIC, ranked the world’s eighth-largest fund with $320 billion of assets by the Sovereign Wealth Fund Institute, has taken a series of stakes in information technology companies in markets like China and India in recent months.
“Certainly the IT sector in China is an important sector. Not quite as big as the American IT sector, but certainly for a global investor it is something that we cannot ignore,” said chief investment officer Lim Chow Kiat, speaking to Reuters in a briefing ahead of the publication of the fund’s annual report.
Earlier this week GIC invested an undisclosed sum in India’s biggest e-commerce firm, Flipkart, which said it raised $1 billion from investors. Earlier this year it also invested $170 million in Brazilian online sport goods retailer Netshoes.
“In the IT side, a lot of these companies require new capital as they are growing quickly so they lend themselves to pre-IPO or private market placement,” said Lim.
Private equity investments make up 9 percent of GIC’s portfolio, while emerging market equities account for 19 percent according to its report for the 12 months ended March 2014, released on Saturday.
The fund said it is increasingly going directly to companies into which it wants to make a private equity investment, rather than relying on pitches from bankers or the companies themselves. “We say, ‘Give us better terms, give us greater influence’ in how a particular investment is structured,” said Lim.
In its annual report, the fund said its annualised nominal rate of return over the last five years to end-March 2014 was 12.4 percent in U.S. dollar terms, driven by the recovery in developed markets after the financial crisis. Last year’s five-year return rate was 2.6 percent
Now though, the fund believes it is likely to get a stronger performance from investments in emerging economies.
“Generally we find more value in emerging market assets,” said Lim.
“It is also about price versus value. The prices in developed markets have gone up a lot relative to the fundamentals, whereas emerging market asset prices have lagged substantially”.
GIC is also the largest shareholder in Swiss lender UBS AG , undergoing a major overhaul as it tries to focus more on being a wealth manager and less on investment banking.
“Their main franchise of wealth management is intact, in fact it has strengthened in recent times,” Lim said. “We see them on track in executing that change.” (Reporting by Rachel Armstrong and Saeed Azhar; Editing by Kenneth Maxwell)