Singapore GIC earns 4.5pct real return over 20 yrs

SINGAPORE, Sept 23 (Reuters) - The Government of Singapore Investment Corp (GIC), one of the world's biggest sovereign funds, said it achieved a real return of 4.5 percent over 20 years to March but saw a tougher environment ahead.

GIC said in its first ever annual performance report on Tuesday that it achieved an average annual nominal return of 7.8 percent in U.S. dollar terms in the 20-year period that ended March 2008.

"Looking ahead we see a more challenging investment environment than what we have experienced since GIC's formation in 1981," Group Chief Investment Officer Ng Kok Song said in the Singapore state investor's first annual report.

GIC said 34 percent of its portfolio was invested in the United States, another 35 percent in Europe and 23 percent in Asia. The Americas and Australasia accounted for the remainder.

The state investor said 44 percent of its portfolio was in listed shares, 26 percent in fixed income and 23 in alternative investments such as real estate and hedge funds.

The fund also held 7 percent of its portfolio in cash as of end-March 2008, it said in the report.

GIC has recently been active along with other highly-secretive sovereign wealth funds in Asia and the Middle East in buying stakes in Western banks such as Citigroup (C.N) and UBS (UBSN.VX).

Traditionally GIC, which manages the central bank's reserves and operates like an institutional fund, only buys minority stakes in companies and avoids taking controlling stakes, unlike its sister fund Temasek Holdings [TEM.UL].

GIC says it manages well over $100 billion but many analysts say the figure is around $300 billion. (Reporting by Kevin Lim and Saeed Azhar; Editing by Neil Chatterjee)