Global Market: GIC to invest $30 billion more in hedge funds, doubles down on AI

Singapore sovereign wealth fund GIC plans to invest an additional $30 billion in hedge funds over the next three years while expanding its exposure to artificial intelligence opportunities across the investment value chain, according to Reuters.

The move comes as the fund reported its weakest 20-year real rate of return since 2020, reflecting a more conservative investment approach adopted in recent years amid heightened global uncertainty.

Hedge fund allocation to focus on agile strategies

According to Reuters, GIC's Group Chief Investment Officer Bryan Yeo said the fresh capital will be deployed across global macro, quantitative and multi-strategy hedge funds, which are viewed as well-positioned to navigate volatile markets and rapidly changing economic conditions.

The sovereign wealth fund has already tripled its hedge fund investments over the past decade, underscoring its growing preference for flexible investment strategies capable of adjusting portfolios as market conditions evolve.

Long-term returns ease
GIC reported an annualised 20-year real rate of return of 3.4% for the period ended March 31, 2026, compared with 3.8% a year earlier. Reuters reported that this marks the fund's lowest long-term performance since it recorded 2.7% in 2020.

The real rate of return, GIC's primary performance metric, measures investment gains after adjusting for global inflation over a rolling 20-year period.

The fund also reported an annualised nominal return of 5.6% in U.S. dollar terms. It said the latest performance has nearly doubled the real value of the reserves under its management over the past two decades, while the reserves have tripled in nominal terms before inflation.

Conservative positioning weighed on returns
According to a Reuters report, GIC Chief Executive Lim Chow Kiat attributed the softer long-term returns partly to the fund's deliberate decision to reduce portfolio risk in recent years.

The strategy focused on greater diversification and lower risk exposure, which management said was consistent with GIC's long-term mandate of preserving and growing Singapore's foreign reserves.

Although GIC does not disclose its assets under management, the Sovereign Wealth Fund Institute estimates the fund oversees approximately $936 billion in assets.

AI remains a long-term investment theme
Despite concerns over elevated valuations across parts of the AI sector, GIC remains optimistic about artificial intelligence as a long-term investment opportunity.

According to Reuters, the fund is investing across multiple segments of the AI ecosystem, including infrastructure, companies developing AI technologies, and businesses integrating AI into their operations.

However, GIC acknowledged that rapid investment in semiconductors, data centres, power infrastructure and AI models has increased the challenge of identifying long-term winners. The fund said it is closely monitoring concentration risks arising from heavy investor interest in AI-related assets.

Portfolio overhaul to improve flexibility
GIC also announced that it has adopted a refreshed investment framework from April 1, designed to improve its ability to reallocate capital in an increasingly unpredictable investment environment.

Under the new structure, investments are organised into three broad categories, equities, fixed income and real assets, representing growth, income and inflation protection respectively. Hedge fund investments will be allocated across these groups depending on their underlying investment strategies.

As of March 31, equities accounted for 56% of GIC's portfolio, up from 51% a year earlier. Fixed income declined to 22% from 26%, while real assets remained unchanged at 22%. The Americas continued to be GIC's largest regional exposure at 53% of the portfolio.

AI focus mirrors broader Singapore investment strategy
GIC's growing emphasis on AI follows a similar strategy adopted by Singapore state investment firm Temasek, which recently said it plans to increase AI-related investments to 15% of its portfolio by 2031, up from 6% currently, after reporting a record net portfolio value.