Exploring the Government of Singapore Investment Corporation (GIC)
The Government of Singapore Investment Corporation (GIC) is a government-owned organization entrusted with managing Singapore’s sovereign wealth. Officially known as GIC Private Limited, the entity was established in 1981 with the mission to invest the sovereign wealth fund more dynamically in higher yielding asset classes over extended investment horizons. With approximately $400 billion in assets under management as of mid-2018, the GIC ranks as the eighth largest sovereign wealth fund globally.
The Pillars of Singapore’s Wealth Management
GIC is one of three main institutions in Singapore responsible for managing the nation’s financial reserves, alongside the Monetary Authority of Singapore (MAS) and Temasek Holdings.
Key Takeaways
- The GIC is one of three financial entities that manages the government of Singapore’s financial assets.
- As a sovereign wealth fund, the GIC’s goal is long-term investment to preserve and enhance the funds’ international purchasing power.
- The GIC holds about $400 billion in assets under management.
Understanding the GIC
GIC manages funds on behalf of the Government of Singapore and the Monetary Authority of Singapore. As a “Fifth Schedule” corporation, GIC has two unique features: certain actions require the Singaporean President’s approval (e.g., appointment and removal of directors and key managers), and GIC’s financial statements are audited by the Government of Singapore’s auditor-general. GIC’s leadership comprises prominent government figures and independent directors from the private sector.
GIC’s portfolio includes a broad array of financial assets. It manages about 80% of its holdings internally. Historically, it has maintained a low profile but has taken opportunistic positions during financial crises, like the U.S. housing crisis from 2007 to 2010.
Performance of GIC Investments
GIC does not disclose precise fund details in its annual reports to avoid exposing Singapore’s financial reserves, which helps prevent speculative attacks on the Singapore dollar during economic volatility. However, it does provide five, 10, and 20-year performance and risk management metrics. Over a 20-year period ending on 31 March 2019, GIC achieved an annualized return of 3.4% above global inflation, essentially doubling the international purchasing power of the reserves.
Commitment to the Santiago Principles
In 2008, GIC played a leading role in developing the 9 Generally Accepted Principles & Practices for sovereign wealth funds (SWFs) and recipient countries alongside the Abu Dhabi Investment Authority and the US Treasury. These principles laid the groundwork for the voluntary set of 24 guidelines known as the Santiago Principles, aimed at promoting good governance, accountability, transparency, and prudent investment practices while maintaining a stable investment climate. Today, more than 20 member SWFs, including GIC, observe these principles.
Related Terms: sovereign wealth fund, investment management, Temasek Holdings, Monetary Authority of Singapore, Santiago Principles.
