LIM CHOW KIAT'S loyalty has paid off at last. In February
the 43-year-old fixed-income specialist took over as group CIO
of powerful sovereign wealth fund GIC (formerly Government of
Singapore Investment Corp.). For Lim, a Singaporean who joined
GIC in 1993 as a graduate trainee and rose through the ranks to
become deputy group CIO and president of GIC Asset Management,
the subsidiary responsible for investing in equities, fixed
income and commodities, just before to being named group CIO,
the appointment marked the culmination of a sterling career.
GIC is renowned for cultivating its own talent, and its new CIO
is entirely homegrown.
When Lim started at GIC’s headquarters in
Singapore, the state-owned investment company had just 200
employees. Twenty years later GIC commands a team of 1,200 in
nine external offices from Mumbai to San Francisco (and will
open an offce in São Paulo in 2014). GIC invests a
global portfolio worth an estimated $279 billion thanks to
discretionary annual contributions from the Singaporean
government and strong performance over the past two decades.
During that time it has posted an annualized real rate of
return of 4 percent above global inflation.
Last year GIC launched a major strategic review and revamped
its investment framework to better identify the drivers of
long-term performance. The fund has since revised its portfolio
structure so the investment team can isolate and more closely
observe the return streams available from global markets (or
pure beta), strategic asset allocation and skill-based, active
strategies. Led by Lim, senior investment professionals still
allocate the risk budget among internal and external active
managers, but GIC’s modified approach allows it to
fund new strategies through a combination of asset classes
rather than confining them to one.
Identifying prospective investment opportunities —
and nimble traders — is an ongoing task, but Lim, who
has extensive experience in public markets, welcomes the
challenge. In August the press-shy CIO discussed
GIC’s views on structural risks in developed and
emerging markets in an exclusive e-mail interview with
Sovereign Wealth Center Editorial Director Loch Adamson.
Sovereign Wealth Center: What are the greatest risks
you perceive in the global capital markets?
Lim: Global capital markets will have to
get through two adjustments in the next two to three years,
starting with the potential tapering of the Federal
Reserve’s quantitative easing. While the recent
market volatility was a good practice run, there is always an
element of uncertainty when such an adjustment actually takes
place. Post–financial crisis there has also been some
loss in the broker-dealer community’s capacity to
cushion market moves. So entities dependent on cheap credit or
opportunistic funding would need to prepare for that. Second,
the tapering of China’s credit expansion will
likely hog the headlines and keep volatility elevated. While
such an effort raises the long-term prospects of the Chinese
economy, short-term financial market reactions are likely to be
volatile and negative.
Do you have any confidence in the euro
zone’s nascent recovery?
We have a very modest expectation of growth in Europe. The
twin challenges of deleveraging and regaining competitiveness
will likely weigh on the weaker euro zone economies for several
more years. But there are bottom-up investment opportunities
for long-term investors like GIC. For example, we recently
invested with partners in a gas transport and storage
infrastructure in France. While the macroeconomic picture is
challenging, Europe has many assets and businesses that are
How does GIC view Asian markets?
Historically, GIC’s portfolio was very much
focused on developed markets. Even though we began investing in
China and other emerging markets as far back as the late 1980s,
it was only in the early 2000s that we significantly raised our
allocation to emerging markets. Besides public markets, we
expanded into real estate and private equity, which
necessitated setting up local offices. Today emerging markets
make up about 15 to 20 percent of our portfolio.
Does the recent institutional pullback from emerging
markets worry you?
For quite some time now, we have had a strong belief that
emerging-market consumers will provide an important source of
investment returns for the medium to long term. We believe that
trend remains intact. This is not to say we will not run into
short-term financial market disappointments from time to time.
If you look back at the performance record of emerging markets,
you see clearly that they have had large fluctuations in
short-term returns. Indeed, we have just witnessed such a
disappointment in the past three years, with broad
emerging-market equities lagging developed-market equities by
about 30 percent.
What obstacles does GIC confront when investing in
An additional challenge of emerging-market investing is
finding the right vehicles. For example, poor corporate
governance and high earnings dilution can put a lid on returns,
and exposure to consumer-related growth sectors can be very
limited when simply buying a country’s equity
index. A strong grasp of fundamentals is needed. So our
investors, internal and external, are constantly on the lookout
for the best ideas to navigate.
Do you prefer to invest independently or to make
GIC welcomes co-investing opportunities. We have had a long
history of doing those, especially in the private equity space.
Our real estate team has also partnered with leading industry
companies in property projects. More recently, we also stepped
up the effort on the public market front. In addition, we have
formed a new group, the Integrated Strategy Group, or ISG,
which has been set up to drive our efforts in opportunities
that may come in unconventional forms or with cross-asset-class
Do you seek out co-investors, or do they come to
We maintain contact with a wide variety of fellow investors,
including sovereign and pension funds. On deals we do not have
formal arrangements to coinvest but do find ourselves sometimes
in the same transactions.