Singapore’s $1 trillion sovereign wealth fund open for business in Australian

GIC, Singapore’s trillion-dollar sovereign wealth fund, is setting up shop in Australia.

Chief executive Lim Chow Kiat flew into Sydney this week for the opening of the local office – appropriately in Chifley Tower, which GIC holds in a portfolio of Australian real estate it has built up over three decades.

“We have more plans for Australia and New Zealand,” Chow Kiat tells The Australian.

He sees potential in real estate, in energy transition and in attracting the best managers worldwide. More broadly, with the great repricing of markets, he fancies inflation-linked bonds.

GIC last opened an overseas office seven years ago in Brazil. “We are very careful in setting up new offices. It is usually deliberated over a significant length of time, making sure that it is a decision that we will not change for a long, long time,” Chow Kiat says. “We wanted to deepen our connections locally in Australia, having worked with many partners over the years, so it has become a new effort for us globally.”

Partnerships have underpinned GIC’s growth. These include a joint venture with Macquarie Capital to invest in student accommodation business Iglu, and more recently with ESR in logistics assets across Australia.

GIC was set up in 1981 to manage Singapore’s foreign investment reserves, with a mandate to deliver above-inflation returns over 20 years. The only place it does not invest is Singapore. Globally its portfolio stretches across debt, private and public equity, property and infrastructure.

GIC sits alongside the Monetary Authority of Singapore and Temasek, the government’s $770bn high-growth equity fund. GIC’s total funds under management, however, remain a closely guarded secret.

Since the size of MAS and Temasek is public, the Singaporean government has no wish to publish GIC’s numbers. For anyone that can add up, that would reveal the strategic reserves of Singapore, leaving its currency open to speculative attacks.

“The reserves that we manage have a role of stability, a role of protecting Singapore’s financial system. From time to time, the world goes through episodes of financial crisis and difficulties. It is not wise for us to disclose how much arsenal we have in times like that,” says Chow Kiat.

GIC chief executive Chow-Kiat Lim at the Chifley Building in Sydney. Picture: Damian Shaw

Chow Kiat lives and breathes the market. He is a GIC lifer, joining from university in 1993 and rising to be head of fixed income and then for several years the chief investment officer.

GIC has traditionally balanced the portfolio by asset class rather than country, but Chow Kiat says that may be changing.

“We do have to pay attention to the country dimension. And in fact, I think going forward significantly more, because the world is deglobalising a little bit,” he says, adding that Australia as a stable economy has kept GDP growth going for many years. It offers good governance, quality corporate management, and it is rich in resources that are in demand.

“Australia also has a very positive demographic tailwind. We have had really good experience in the last 30 years,” he says.

Joining him for the interview with The Australian are Sunny Tsun, who is head of GIC’s local office and also Head of Real Estate ANZ, and Richard Massey, the deputy head of Real Estate ANZ. “We need to have local leadership here who we can trust so that we sleep really well. With these two guys I sleep really well,” says Chow Kiat.

Do they sleep well though?

The question gets a laugh. “We do because we have the support of head office. That gives us a lot of comfort,” says Massey, who has been with team since 2016.

“What we are looking for with the office opening is growth, being closer to our partners, closer to the opportunities and being able to invest more over the long term,” says Massey.

Beyond headline-making deals like the Milestone Logistics acquisition, Massey says GIC makes smaller and more regular investments with partners.

He pitches GIC as the partner of choice: a scalable portfolio across 10 sub-sectors of real estate and the ability to invest across the capital stack from direct investment to credit, and across different levels of risk.

Tsun says that among the 14-strong real estate team in Australia there are six nationalities, including British and Chinese. In a sign of appetite beyond real estate, the office may soon take Singapore-based team members from public and private equity and bonds.

“One reason for setting up the office is to attract talent to come and work for GIC,” says Chow Kiat. “This is a growing market, so both in terms of deploying capital and getting more people to the bench, it make sense.”

Asked about his own passions, Chow Kiat says they include investing and his family. He also has a particular interest in current affairs. “I’m just very lucky that it overlaps with my investing work very much. You have to kind of know what’s going on,” he says.

On the global economy, Chow Kiat has two words: profound uncertainties. This makes generating the returns of the recent past challenging. “Growth is not going to be as strong for maybe an extended period as the world battles with this inflation problem,” he says.

A bright spot is the bond market where yields in advanced countries have backed up 3 to 4 per cent. Chow Kiat says it is hard to tell whether yields have peaked. Whether they are really good value depends on whether central banks contain inflation.

“Most measures of inflation expectations are quite anchored. That’s a good sign,” he says.

“But that rests on expectation that central banks are prioritising inflation. If they continue on that path, the short end would have a lot of value.”

On China, Chow Kiat seeks clarity. Self-imposed lockdowns have put the breaks on growth and there is risk in property. But he also sees the sheer size of the domestic economy driving growth.

“We are eagerly waiting for them to come up with policies,” he says.

GIC is investing heavily in energy transition. This year it made a strategic investment in Intercontinental Energy, which is pioneering green hydrogen production in Western Australia, Oman and Saudi Arabia.

But it is just as prepared to provide transition finance to US power company Duke Energy in its shift from coal to renewables.

“It of course went towards transition, but also gave us a reasonable return,’ says Chow Kiat. “We hope there are many more of this kind of opportunities around the world.”

Chow Kiat welcomes the US government’s Inflation Reduction Act, which is rich in investment incentives. “We think it then opens up the opportunity set and would make a lot of these projects viable for the private sector to get involved. But it is a huge need – $3 trillion to $4 trillion a year. So we hope of course more countries can come up with plans and policies,” he says.