Singapore's 'voracious' GIC tops list of most active state-linked investors, ahead of China and Japan

Singaporean sovereign wealth fund GIC emerged as the most active state-owned investor in the world last year, outranking larger state funds from China, Norway and Japan, as other investors downshifted amid the volatility brought on by the coronavirus pandemic.

According to a report by independent data and analysis platform Global SWF comparing the activities of 438 state-owned investors, GIC, the 10th-largest state fund worldwide, deployed US$17.7 billion into 65 deals - down slightly from US$24 billion in 2019.

The three largest state-owned investors in the world - namely Japan's Government Pension Investment Fund (GPIF), Norway's Norges Bank Investment Management (NBIM) and China Investment Corporation (CIC) - were not ranked among the most active funds last year. Neither was the Hong Kong Monetary Authority (HKMA), which was ranked the ninth-largest state-owned investor, just ahead of GIC.

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This was because of their lack of investments in private markets, said Daniel Brett, the head of research at Global SWF.

"GPIF, NBIM and HKMA have relatively little exposure to private markets, with much of their assets in fixed income and public equity," he told This Week In Asia. The NBIM, for example, has 27 per cent of its assets in fixed income, 70 per cent in public equity, and 3 per cent in real estate, he said.

Even so, the Norwegian fund remained the second largest state-owned investor globally, with US$1.128 trillion assets under management, just below the GPIF's US$1.592 trillion. The CIC followed at US$1.046 trillion, then came China's State Administration of Foreign Exchange at US$743 billion and the Abu Dhabi Investment Authority at US$726 billion. The HKMA had US$540 billion of assets under management.

In terms of investment activity last year, the Canada Pension Plan tailed Singapore's GIC, at US$15 billion, followed by Canadian pension investor CDPQ with US$12.1 billion. Singaporean state investor Temasek came in fifth, at US$11.3 billion.

Describing the past year as a "roller coaster", the report noted that the flow of capital came to a halt in March as the virus swept across the globe. Deals were "negligible" at the peak of the pandemic, it said, as they could not be signed off without physical meetings, and investors increasingly erred on the side of caution. This resulted in total investment activity among state funds dropping from US$199.4 billion in 2019 to US$162.3 billion last year.

Still, Brett noted that Singapore's GIC was a "voracious" venture capital investor, and has been more aggressive than other state funds in its hunt for long-term yield, with a heavy focus on tech and innovation. GIC, he suggested, was less risk-averse to emerging markets.

"This confidence is informed by experience as well as culture of supporting entrepreneurship, which has marked out the Singaporean investor as a thought leader and trailblazer among sovereign funds," Brett added.

Other venture capital firms and analysts thought so, too. Justin Hall, a partner at Golden Gate Ventures, said he was not surprised by GIC's investing vigour: "Temasek and GIC have always had an outsize reputation for being some of the most thoughtful, innovative funds in the world."

A mix of calculated foresight and a proactive, deliberate investment team had likely helped GIC rank highly again this year, said Hall, adding that the investor likely moved quickly to take advantage of opportunities arising from the pandemic.

The report found that Temasek and GIC were the top two tech investors globally last year, with Temasek investing US$2.3 billion and GIC, US$2.2 billion. Temasek made investments in pharmaceutical and biotechnology companies, including leading a US$250 million private placement in Germany's BioNTech, which eventually developed a coronavirus vaccine with pharmaceutical giant Pfizer. GIC, meanwhile, dabbled in data centers and cloud computing.

"I also think its relative economic and political stability in the face of the virus - two things in short supply across many countries battling Covid-19 - allowed Singapore's sovereign wealth managers to keep their collective heads down and focused on doing their job," Hall said.

James Tan, managing partner of Quest Ventures, said the success of Singapore's state-owned investors was evident, pointing to how net investment returns were the largest contributor to Singapore's government revenues, overtaking corporate and personal income taxes, as well as the goods and services tax.

Separately, the Global SWF report also revealed that state-owned investors have been more cautious in their exposure to private markets in China, even though the Chinese tech sector continued to be a big attraction last year. The GIC and Temasek, it said, were the "main stalwarts" of the Chinese market, with Temasek's portfolio filled more with Chinese investments than Singaporean ones for the first time last year.

The report also underscored a "sharp pivot" away from fintech while state investors poured more money into the information technology, life sciences and biotechnology sectors. Artificial intelligence as well as education and agricultural technologies were also areas that have propped up tech investments.

"On one hand, [investors] appeared to be reluctant to expose themselves to a high-risk financial services sector at a time of plummeting household spending, while on the other hand, they were seeking opportunities created by a black-swan event that looks set to define future trends in tech," the report said.

State-linked funds are increasingly looking for investing opportunities in artificial intelligence. Photo: Shutterstock alt=State-linked funds are increasingly looking for investing opportunities in artificial intelligence. Photo: Shutterstock

Selena Ling, head of treasury research and strategy at OCBC Bank, said the pivot was not unexpected given that the pandemic has revealed cracks in global supply chains, and because of medium-term shifts towards e-commerce and home-based learning.

Another possibility for the shift away from fintech was that multiple pandemic-related opportunities had emerged with wide-ranging, long-term impacts, said Tan Yinglan, founding managing partner of Insignia Ventures Partners.

But James Tan, the managing partner of Quest Ventures, said he felt that the fintech sector was not necessarily losing its lustre. He said that the industry had received significant investments in the past years and it was "only natural" for investors to consider opportunities in other sectors.

Tan added that the sectors of interest in the past year were all geared towards how governments could better respond to future pandemics. Covid-19, he said, has raised the issue of how to safeguard basic needs and capabilities, ranging from productivity to education to food and health care systems.

"Considering the mandate of sovereign wealth funds in general, which is to make long-term generational investments that secure the country's financial future, it makes sense that these investments point towards innovation that secures the future in other ways as well," he said.

Hall, from Golden Gate Ventures, said he would expect the investment trends to continue into this year. "So long as the coronavirus pandemic remains top of mind for citizens and policymakers, then I think a tremendous amount of capital will continue pouring into these industries," he said.

This article originally appeared on the South China Morning Post (SCMP).

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