High returns not sustainable in global crisis: Singapore GIC

Agence France-Presse - 2/2/2009 8:47 AM GMT

High returns not sustainable in global crisis: GIC

High returns obtained for 20 years by one of Singapore's sovereign wealth funds will not be seen during the global credit crisis, the firm's deputy chairman said in remarks published Monday.
The Government of Singapore Investment Corp (GIC), one of the world's largest sovereign wealth funds, announced in September that its nominal annual rate of return over the past 20 years was 7.8 percent in US dollar terms.
However, deputy chairman Tony Tan Keng Yam said the firm, which has bailed out international financial institutions hit by the economic turmoil, said the economic environment had made such profits very unlikely.
"I do not expect GIC or any other large investor to be able to reproduce the type of high returns which GIC was able to deliver in the last 20 years," Tan was quoted as saying in an interview with the Straits Times.
"It's now a completely different economic and financial environment which all investors, all companies have to deal with -- and this will last for quite some time," Tan said.
In late 2007 and early last year GIC injected billions of dollars into Swiss bank UBS as well as US banking giant Citigroup, which suffered massive losses from US subprime, or higher-risk, mortgage investments.
Subprime troubles later evolved into the worldwide financial slowdown.
Governments and central banks have stepped in with stimulus packages and other measures to confront the crisis. If these measures work, the world's economy could start to recover later this year, Tan said in the interview.
A recession that lasts into 2010, however, could be a sign of "systemic change in the world economy," he said.
In a weekend speech to the World Economic Forum of global leaders in Davos, Switzerland, Tan said sovereign wealth funds and other institutional investors will play an important role in the stabilisation and eventual recovery of asset markets.
"Such institutions, with their long-term investment horizons could be important sources of demand for undervalued assets.
"This would contribute to stabilising financial and household sector losses, thereby helping to restore both credit creation and demand in the real economy," said Tan, whose speech was released by GIC.

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