Tuesday, September 28, 2010

How is GIC faring?

Sources:
Business Times News
Temasek Review Discussion
GIC Report 2010



Most Singaporeans probably don't care about how GIC is investing money since we cannot change anything. I wonder how do GIC decides if they are doing well or not besides the rate of return.

Of course, higher rate of returns is clearly better, but it is not fair to judge a poor performance in depressing global economy or applaud if it is doing well in a booming economy. For example, Temasek Review compared the 20-year rate of return with
the Down Jones or S&P 500 index in September:

GIC had released a report yesterday showing that its 20-year nominal annual rate of return in US dollar terms jumped from 5.7 percent to 7.1 percent for the last 12 months which is hardly impressive considering the fact that the Dow Jones Industrial Average is now up 8.44 percent and the S&P 500 index has increased by 9.5 percent in the month of September alone.


There are no probably easy way to comment on the GIC performance since there isn't any benchmark displayed. A performance benchmark with perhaps a mixed of funds rather than a chart of rate of return might be more appropriate but it isn't easy to find a right benchmark since there aren't much fund with a similar size or objectives of the GIC. Warren Buffett, a well-known investor, used the S&P 500 with dividends as a comparsion although he has his own intrinsic value to measure the value of the business/companies he has a stake in. GIC does states its own performance criteria:

As an investment management company, we evaluate our performance in three ways:
whether we achieve a reasonable rate of return above global inflation for
the total portfolio;
how each investment professional or team performs against specific market benchmarks or absolute return targets;
and how our managers’ results compare with those of their peers in the industry.


We evaluate the performance of our investment professionals
against relevant market benchmarks such as the MSCI and
Barclays Capital Global Aggregate Bond indices.


They stated clearly they evaluate performance against relevant market benchmarks but I didn't see any performance comparison. It will be nice if could show the comparison instead of showing the 20-year rate of return chart and the portfolio allocation to let people who care see how well or poorly is our GIC faring.

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