Acting as a cornerstone investor in bond deals is helping GIC boost returns on its fixed-income portfolio as yields persist near record lows and risks start to increase in the bond market, according to Singapore’s sovereign-wealth fund.
Companies that issue bonds directly to GIC when it acts as an anchor investor save on underwriting fees and part of those savings are passed on to the wealth fund, Chief Investment Officer Lim Chow Kiat said in an interview with the London-based Sovereign Wealth Center published Tuesday.
“Maybe we’re aware that a company needs ‘x’ billion for its capital expenditure, so we do almost an investment banker’s job,” Lim said. “The whole process helps us to understand the company better and to build a good relationship.”
GIC is turning to such strategies as interest rates in markets such as the US and Europe are at record lows and buyers of government bonds in developed economies lost 2.9% this year, according to the Bloomberg Global
Developed Sovereign Bond Index. The three risks in the fixed-income market are the possibility of higher inflation, large redemptions from bond funds that could spur a market selloff, and policy errors -- although the probability of those risks are low, Lim said.
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Companies that issue bonds directly to GIC when it acts as an anchor investor save on underwriting fees and part of those savings are passed on to the wealth fund, Chief Investment Officer Lim Chow Kiat said in an interview with the London-based Sovereign Wealth Center published Tuesday.
“Maybe we’re aware that a company needs ‘x’ billion for its capital expenditure, so we do almost an investment banker’s job,” Lim said. “The whole process helps us to understand the company better and to build a good relationship.”
GIC is turning to such strategies as interest rates in markets such as the US and Europe are at record lows and buyers of government bonds in developed economies lost 2.9% this year, according to the Bloomberg Global
Developed Sovereign Bond Index. The three risks in the fixed-income market are the possibility of higher inflation, large redemptions from bond funds that could spur a market selloff, and policy errors -- although the probability of those risks are low, Lim said.
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