Singapore's sovereign wealth fund GIC said it is now more cautious about the investing environment than it was last year and is bracing for low returns due to high valuations and slowing economic growth.

But while GIC, among the world's biggest investors, is worried about heightened political and policy uncertainty, including the Sino-U.S. trade war, it is positioning itself to cushion the impact by investing in countries such as Vietnam which are benefiting from a shift in supply chains.

"We are more concerned, even more concerned compared to last year because the developments over the last 12 months have been more negative than even what we were thinking about," CEO Lim Chow Kiat told Reuters in an interview.

GIC is ranked the world's eighth-biggest sovereign investor, managing $390 billion in assets, according to the Sovereign Wealth Fund Institute.

While smaller Singapore peer Temasek Holdings focuses on equities, GIC, which manages most of the government's financial assets, invests in a wide range of assets and has a long-term goal of beating global inflation.

Underscoring its cautious stance, GIC's allocation to bonds and cash rose to a record 39% in the year that ended in March from 37% in the previous year and 31% five years ago.