GIC and Temasek among top 10 sovereign funds globally: survey

A key insight of OMFIF study is that almost 40% of global public investors plan to raise their exposure to Asia, compared to just 15% last year

Aug 25, 2021


SINGAPORE may be a little red dot but its sovereign funds - GIC and Temasek - rank among the top 10 sovereign funds globally.

The ranking is compiled by a study, the Global Public Investor 2021 survey, published by OMFIF Ltd (Official Monetary and Financial Institutions Forum). The GPI ranking comprises 850 institutions with investible assets of a total US$42.7 trillion.

There are three segments of GPIs - central banks, sovereign funds and public pension funds. Each segment has a separate sub-ranking.

In the overall GPI ranking, the GIC takes the 21st spot, down one notch from 2020. Its assets under management rose 3 per cent to US$453.2 billion in 2021.

Temasek took the 23rd spot, up two notches from 2020. Its assets rose 16 per cent to US$431.31 billion.

In the segment of sovereign funds alone, GIC and Temasek took sixth and seventh spots, respectively.

In the overall GPI ranking, the Monetary Authority of Singapore took the 28th spot, up by six notches. Its assets rose 30 per cent to US$362.3 billion. This surge in assets puts it among the top five globally for "highest climbers", ranked by the absolute increase in assets (excluding the GPIs in the top 10 ranking).

The CPF ranked 30th in the overall GPI ranking, up two notches from 2020. Its assets rose 7 per cent to US$311.14 billion. In the segment of pension funds globally, it is the ninth largest.



The GPI 2021 surveyed 100 central banks, sovereign funds and public pension funds, as well as internal research and contributions from external asset owners, to draw insights on growth prospects, the investment climate and capital markets.

One of the key insights is that almost 40 per cent of GPIs plan to raise their exposure to Asia, compared to just 15 per cent last year. In contrast only 8 per cent plan to add to their North American holdings, and 7 per cent to European holdings. "The lower-for-longer interest rate environment appears to be driving public investors away from traditional regions and safe havens and towards newer markets, with China set to benefit in particular," said the report.

Not all GPIs experienced asset growth. GPIs in emerging markets saw declines, particularly in the Middle East.

Over 20 per cent of central banks, however, plan to add to their holdings of equities and bonds, compared to about 20 per cent last year. Of public investors, 60 per cent plan to add to their green bond holdings over the next 12 to 24 months, compared to 45 per cent last year.

The study said that public investors strike a delicate balance on the question of sustainability. The pandemic has brought to the fore ESG (environmental, social and governance) factors as major areas of concern for official institutions, particularly in their discussions with their external asset managers.

"Now funds want to explore new ways of benchmarking, new scoring methodologies and new approaches to responsible ownership. For central bank reserves managers or stabilisation funds, this poses challenging questions about the trade-offs between liquidity, returns and sustainability," the report noted.

These considerations are made more complex by the question of active ownership. Only 4 per cent of central banks say they engage in active asset ownership, with a handful engaging in dialogue with investee companies and participating in multilateral responsible investment forums

In the foreword, OMFIF chairman David Marsh said that the new Joe Biden administration has had a "massive impact" on GPI institutions for three reasons.

One, President Biden's fiscal stimulus, alongside the Federal Reserve's continuing "full-hearted accommodation", has produced a far more vigorous recovery than expected. "This has bolstered financial markets around the world, but also sparked expectations that this year's US inflationary blip will turn out to be more than temporary - raising fears of a wrenching correction later, even a full-scale financial crisis," he wrote.

Two, while Mr Biden has continued ex-President Trump's adversarial policy towards China, 30 per cent of central banks polled expect to boost investment in the Chinese currency.

"In promoting the digital renminbi, the Chinese authorities are already laying down a marker of an assault on the dollar's supremacy. Although it still lags far behind the US currency, and remains not fully convertible, in some important ways the renminbi has come of age as a reserve asset."

Three, President Biden's espousal of the political dimension of countering climate change has brought the US to the forefront of the financial campaign towards a zero-emission world, according to Mr Marsh. Reserve managers typically require investments to meet the standards of safety, liquidity and return. There is now a fourth criterion - that assets also serve to green the economy.