GIC, Singapore’s sovereign wealth fund, is extending its artificial intelligence-related investment focus beyond semiconductor companies and AI developers toward companies that can leverage the technology to maximize corporate value, according to its CEO.
“The winners will be those that can successfully transform themselves, and the losers will be those who fail to adopt AI and might see value erosion or disruption as a result,” CEO Lim Chow Kiat told Nikkei Asia in an interview. He said the fund is focusing on large publicly listed companies that are experimenting with AI and exploring how the technology can transform their businesses and operations.
To identify the winners, the fund will look at the structural advantages that companies possess. “For example, a company might have proprietary data that allows them to use AI to help them increase the productivity and efficiency of their operations,” said Lim.
Among such investments, GIC has invested in US drugmaker Eli Lilly, which is using AI in areas such as drug development and manufacturing, according to the fund.
GIC began investing in AI-related businesses around 2020. Its investments have included semiconductor makers and companies in the chip supply chains in Japan, as well as US-based AI developer Anthropic and data center operator Vantage Data Centers.
Lim said global semiconductor companies are nearing full production capacity.
“For the next two to three years, we hear from many companies that capacity is full and they cannot take in more orders,” he said, adding that current market valuations of semiconductor companies appear to be close to fully pricing in those growth prospects.
Lim was speaking ahead of GIC’s announcement on Friday of its annual investment performance for the year ended on March 31.
The results showed that the fund delivered an average annual return of 3.4% above inflation over the past 20 years, down from 3.8% recorded a year earlier.
“GIC emphasized diversification and portfolio resilience, and took less risk,” Lim said. On a nominal basis, the fund generated an average annual return of 5.6% over the same period.
Amid heightened tensions between the US and Iran, and conflicts in various regions, geopolitical developments have “raised the uncertainty and volatility” in the global macroeconomic environment, Lim said.
“Our primary way of dealing with that would be through diversification of portfolio,” he said.
Over the past ten years, the fund has tripled the size of its hedge fund investments. Looking ahead, it plans to deploy an additional USD 30 billion into hedge funds over the next three years.
During the same interview, chief investment officer Bryan Yeo said:
“When we look at the historical experience, hedge fund returns actually are very lowly correlated or uncorrelated with many other traditional strategies like equities, fixed income, real estate, infrastructure.”
According to the annual results, the US remained the largest investment destination in GIC’s portfolio, accounting for 53% as of March, up from 49% a year earlier. The strong performance of US financial markets in recent years has been driven by AI-related companies.
“In the US, they have the largest [and most liquid] capital markets in the world and they have many assets and companies which are of high quality, [and] very advanced in technology,” Lim said.
GIC’s share of investments in the Asia Pacific region, meanwhile, declined to 22% from 24%. Regarding China, which has faced a financial downturn in recent years, Lim said the country has made significant technological progress across various sectors, adding that “the entrepreneurs in China are impressive.”
He added that China remains a market in which GIC would like to continue investing.
In January, GIC announced that it had formed an investment partnership with Sony Music Group to acquire and manage music copyrights across a wide range of genres.
Lim said the fund plans to deepen its presence in the Japanese market, where it has identified a number of thematic investment opportunities. “One of which is the IP space,” he said, noting: “Japan has got quite a lot of good IP that can be used in various entertainment.”
According to research firm Global SWF, GIC’s assets under management are estimated at around USD 930 billion. The purpose of the fund is to manage and preserve the real value of Singapore’s foreign reserves.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.