Investment Approach
Faced with these profound changes, it is tempting to chase the short-term hype or retreat in the face of the unknown. At GIC, we do neither. We focus on long-term value, with an emphasis on avoiding permanent loss. We apply ‘inversion’—studying the typical causes of permanent impairment in order to steer clear of them. Historically, such losses have stemmed from poor fundamentals, disposals due to an inability to service debts, exogenous shocks, or even fraud. Our investment process is designed to guard against such pitfalls.
Less obvious but equally damaging is overpaying. Situations like the Nikkei bubble in the late 1980s, the Nasdaq collapse in the early 2000s, and the periodic bursting of meme stock bubbles all illustrate the dangers of valuation overshoot. Long horizons offer little help in such situations. Even if asset prices eventually recover, the time lost will have been too great. This is why we remain disciplined on price.
From the top down, we focus on harvesting long-term risk premia in a diversified manner—building a resilient and flexible portfolio that can withstand market stresses, adapt across cycles and long-term shifts, and compound value over time. While concentrated markets can make diversification feel costly in the short term, it remains essential to long-term portfolio resilience. GIC diversifies across asset classes, geographies, sectors, and time. For example, in private markets, we spread investments across multiple years—known as time or vintage year diversification—to avoid overexposure to any single time period.
Amid unprecedented shifts, diversification alone is no longer enough; we also need granularity and agility. Granularity allows us to be precise. Within broad themes like AI or climate, opportunities vary widely across value chains. We need to break these down into investible segments. For instance, in AI, we distinguish between enablers like chipmakers or data centre providers, monetisers like cloud platforms and software companies, and adopters integrating AI into their operations. This enables our investments to be more targeted.
Similarly, in climate, we recognise long-term opportunities in electrification, energy efficiency, and climate adaptation. However, investments vary in risk profile, policy support, and relevance across markets. In the global energy landscape, exponential demand growth and persistent supply disruptions have renewed focus on energy security and affordability. This has resulted in more fragmented investment trends, with each country charting its own path to secure, cost-competitive energy sources. This requires, again, a targeted approach.
Agility, meanwhile, requires us to act decisively as these trends evolve. In volatile markets, dislocations arise when market participants are forced to buy or sell, creating mispriced assets. By preserving liquidity and flexibility, we can respond when others can’t—whether in private credit during bank lending crunches, or secondaries where liquidity-seeking investors sell at discounts. Additionally, we see agility as the ability to spot underappreciated themes early. Climate adaptation, a vital but historically overlooked part of the climate response, is gaining urgency as physical risks rise. It is becoming both an inevitable need and a complementary investment theme alongside decarbonisation. GIC research estimates that the investment value for a select set of adaptation solutions will grow from US$2 trillion today to US$9 trillion by 2050, with US$3 trillion attributed to incremental growth driven by global warming. This opens up opportunities across both established solutions, such as weather-resilient building materials, and emerging technologies, such as weather intelligence.
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