GIC plans $30 billion hedge fund push as returns slip to 3.4%

GIC plans to invest $30 billion in hedge funds over the next three years, the sovereign wealth fund said Friday, as it reported a 20-year annualized real return of 3.4%, its weakest since 2020.

"Hedge funds provide us with low correlation to other alpha strategies we have," said Bryan Yeo, group chief investment officer at GIC. "As a portfolio, it has low market beta and it diversifies from the traditional equity, fixed income, credit and private market strategies."

The fund, which the Sovereign Wealth Fund Institute estimates manages about $936 billion in assets, has tripled its hedge fund investments over the past decade and will target global macro, quantitative and multi-strategy managers that can pivot quickly as uncertainty persists, Yeo said. GIC's 20-year real return fell from 3.8% a year earlier, though its nominal return in U.S. dollar terms stood at 5.6%. Diego Lopez, founder and managing director of Global SWF, estimated the fund's single-year return for the fiscal year ended March 31 at 22%, pushing AUM to $1.16 trillion, according to his firm's proprietary model.

The $30 billion commitment reflects sustained institutional demand for alternative strategies at a time when crowded bets on artificial intelligence have fueled sharp swings in technology stocks. GIC is spreading its AI investments across infrastructure, product builders and enterprise adopters, Yeo said, while acknowledging that the rush into chips, data centers and power has made it harder to pick long-term winners.

A Refreshed Framework for a Harder-to-Predict World

GIC began shifting to a new investment framework on April 1 that groups its portfolio into equities, fixed income and real assets — representing exposure to growth, income and inflation resilience. Hedge fund allocations are distributed across these groups according to their mandates and strategies. As of March 31, equities made up 56% of the portfolio, up from 51% a year earlier, while fixed income fell to 22% from 26% and real assets were broadly stable at 22%. The Americas remained GIC's largest regional exposure at 53%.

Chief Executive Lim Chow Kiat said the 3.4% real return partly reflected a deliberate decision to take on less risk in recent years. "Given our mandate, this result is within that expectation," Lim said. "We wanted to focus on diversification, and we took less risk." The 3.4% return means GIC has close to doubled the real value of the reserves under its management over 20 years; before inflation, the reserves tripled.

AI Bets Spread Across the Value Chain

GIC's AI strategy mirrors a similar push by Singapore state investment company Temasek, which said earlier this month it aimed to raise AI-related exposure to as much as 15% of its portfolio by 2031 from 6% now. Temasek reported a record net portfolio value of S$518 billion.

Yeo said GIC is investing in AI infrastructure, companies that build AI products and firms that use AI to improve their own operations. But he cautioned that concentration risk is a growing concern. "Very likely, in the entire AI ecosystem, there will be some pockets of hype and overvaluation," he said.

The $30 billion hedge fund commitment will be deployed over three years, with GIC also planning to grow cross-asset investing that combines hedge fund strategies with traditional stocks and bonds. The fund is targeting more specialist hedge funds focused on particular themes or industries, building on a track record of over 20 years in the space. GIC typically looks for hedge funds with a strong investment philosophy, competitive edge and disciplined risk-management process, and works with managers to develop and incubate new strategies, Yeo said.

The hedge fund push comes as sovereign wealth funds globally increase allocations to alternative assets in search of returns uncorrelated with public markets. For GIC, which manages part of Singapore's foreign reserves with a mandate to protect and increase purchasing power over the long term, the strategy represents a bet that active managers can outperform in a period of elevated geopolitical risk and shifting monetary policy across major economies.

This article is for informational purposes only and does not constitute investment advice.