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GIC (sovereign wealth fund)

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GIC Private Limited is a Singaporean sovereign wealth fund that manages the country's foreign reserves. Established by the Government of Singapore in 1981 as the Government of Singapore Investment Corporation, from which the acronym "GIC" is derived, its mission is to preserve and enhance the international purchasing power of the reserves, with the aim to achieve good long-term returns above global inflation over the investment time horizon of 20 years.

GIC Private Limited
Company typeState-owned Pvt Ltd
IndustryFund management (sovereign wealth fund)
Founded22 May 1981; 43 years ago (1981-05-22)
FounderGovernment of Singapore
HeadquartersSingapore
Key people
Lee Hsien Loong (chairman)
Lawrence Wong (Deputy chairman)
Lim Chow Kiat (CEO)[1]
AUMIncrease US$770 billion
(June 2023)[2]
Number of employees
~1,500[3]
Websitewww.gic.com.sg

With a network of 10 offices in key financial capitals worldwide, GIC invests internationally in developed market equities, emerging market equities, nominal bonds and cash, inflation-linked bonds, private equity and real estate.[4] The Sovereign Wealth Fund Institute (SWFI) had estimated the fund's assets at US$770 billion as of September 2023[5] while Forbes estimated the fund's assets at US$744 billion after legislation were passed to transfer about US$137 billion from the Monetary Authority of Singapore (MAS), the country's central bank and monetary authority.[6][7]

Besides GIC, Singapore also owns another sovereign wealth fund, Temasek Holdings, with managed assets at about US$630 billion of assets under management, along with the national pension plan Central Provident Fund (CPF) with assets of US$397 billion, giving an estimated assets under management (AUM) of US$1.77 trillion.[8] The MAS also holds a further US$478 billion.

History

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In 1981, Goh Keng Swee, then first Deputy Prime Minister and Chairman of the MAS, saw the trend of Singapore's rapidly growing foreign reserves and decided to invest Singapore's reserves for the future of the nation and the welfare of its people. He was advised by the British merchant bank, N M Rothschild & Sons, and established the GIC.[9]

The government then embarked on a change in investment policy, by investing the bulk of its foreign reserves in longer-term, high-yielding assets rather than in liquid but low-yielding assets.[10]

An undisclosed number of those who left the MAS in 1981 went to work for GIC. In the late 1990s, four of its most senior positions were held by former MAS officers.

Investments

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GIC has the ability to invest across a full spectrum of financial assets, from sovereign debt to infrastructure, and manages approximately 80 per cent of its portfolio in-house.[11]

Traditionally, GIC keeps a high profile in its investments.[12] During the subprime mortgage crisis of 2007–2010, however, a number of its investments attracted controversy.[citation needed] In 2013, according to the Sovereign Wealth Fund Institute, the GIC was one of the most active sovereign wealth fund investors for the year.[13]

In 2006, at the height of the US real estate bubble, it made a US$200 million investment in the equity of Stuyvesant Town–Peter Cooper Village, the largest apartment complex in Manhattan (as well as US$575 million in secondary loans). The management of the complex, Tishman Speyer Properties and BlackRock Realty, defaulted on their loan in 2010, effectively wiping out the investment.[14][15]

In late 2007, during the first phase of the crisis, GIC invested $11 billion Swiss francs for a 7.9% stake in the Swiss bank UBS. The loans were converted into equity in 2010, with an estimated 70% loss of value, though partially offset by a 9% fixed coupon.[16][17] GIC had acknowledged that the timing for the investment could have been better. It also stated that other investments made at that time have had positive returns which offset the losses on UBS. GIC's total portfolio has fully recovered to its value prior to the global financial crisis.[18]

In 2008, GIC invested US$6.88 billion for a 9% stake in Citigroup.[19] In 2009, it pared its stake to less than 5%, realising a $1.6 billion profit, with another $1.6 billion paper profit on its remaining holding.[20]

On 30 July 2013, Singapore's GIC was part of a consortium to acquire Transport et Infrastructures Gaz France (TIGF) which is Total's gas transportation and storage business for an enterprise value of €2.4 billion (US$3.25 billion). The consortium includes Snam (45%) an Italian gas storage and transport operator, Singapore's GIC (35%) and EDF (20%).[21]

As of 2017, GIC holds around 34% of its portfolio in the US; 3% in Latin America; 6% in the rest of Americas; 6% in the United Kingdom; 12% in the Eurozone; 6% in the Middle East, Africa and the rest of Europe; 19% in Asia excluding Japan; 12% in Japan and 2% in Australasia.[22]

In 2017 it was reported that GIC would purchase a 10% stake in British specialist bank OakNorth for £90 million.[23]

In 2021 they took part in a investment round in Dapper Labs.[24]

In December 2023, GIC acquired Cinven's shares in Miller and became the majority shareholder of UK specialist insurance and reinsurance broker Miller.[25]

Performance

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In 2008, GIC published for the first time a report containing information on its 20-year returns and more information on how it is managed and governed, and how it invests Singapore's foreign reserves.

GIC does not disclose the amount of funds it manages and its annual profit and loss. Revealing the exact amount would expose the full size of Singapore's financial reserves and make it easier for speculators to attack the Singapore dollar during periods of vulnerability.[26]

Since 2011, GIC had also published the 5-year and 10-year nominal rates of return to provide a sense of the ongoing medium-term investment performance, even while GIC maintains its sights on the long term. It included two composite portfolios and volatility statistics to reflect the level of portfolio risk and to offer perspective in reading the 5-year and 10-year figures.

For the year ended 31 March 2017, its annualised 20-year real rate of return was 3.7%. In USD nominal terms, GIC achieved an annualised return of 5.1%, 4.3% and 5.7% for the 5-year, 10-year and 20-year time periods respectively.[22]

In August 2021, their estimates also put the total figure of AUM at US$744 billion – or just over S$1 trillion, for the first time in GIC’s history after a 37.5 per cents in return.

Governance and risk management

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The funds managed by GIC are owned by the Singapore Government. Its investment returns supplement the country's annual budget in areas such as education, R&D, healthcare, and infrastructure.[27]

As a Fifth Schedule company under the Singapore Constitution, GIC is accountable in various key areas to the President of Singapore who is empowered under the Constitution to obtain information to enable him or her to safeguard the country's reserves. The Auditor-General, who is appointed by the President of Singapore, submits an annual report to the President and Parliament on his or her audit of the Government and other entities managing public funds.[28]

GIC manages risk by investing in a well-diversified portfolio, with a balanced distribution of asset classes and their underlying business sectors and geographies. This is also why GIC's performance has to be measured on the basis of its overall portfolio rather than by how much it makes or loses on individual investments.[29] Its approach to "risk management" has three distinct components: portfolio risk; process risk; and people risk.[30]

As a board member of the International Forum of Sovereign Wealth Funds,[31][32] the successor of the International Working Group of SWFs that developed the Santiago Principles in October 2008, GIC publishes how it adopts and implements the voluntary set of principles and practices.[33]

New investment framework

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GIC implemented a new investment framework in 2013 to give it more flexibility to focus on "investments that may be riskier in the short term but would generate returns in the long-term."[34]

The new framework defines more clearly GIC's risk and return drivers, its long-term investment objectives and the responsibilities of the GIC board and management.[35]

Firstly, a 'Reference Portfolio is 65% made up of global equities and 35% of global bonds representing global markets. It characterises the risk that the Government is prepared for GIC to take in its long-term investment strategies. Next, the Policy Portfolio is made up of six core asset classes and aims to achieve superior returns over the long horizon and is the main driver of long-term returns. Last is the Active Portfolio, which seeks to outperform the Policy Portfolio, is of skill-based strategies, adopted by GIC's management within risk limits. The skill-based strategies includes choosing investment opportunities within each asset class and investing in asset classes not contained in the simplified Policy Portfolio and cross-asset class strategies.[36]

References

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  1. ^ "Lim Chow Kiat named GIC CEO from Jan 2017". Channel NewsAsia. Archived from the original on 16 January 2017. Retrieved 15 January 2017.
  2. ^ "GIC Private Limited (GIC)".
  3. ^ "GIC".
  4. ^ "FY16/17 Report on the Management of the Government's Portfolio" (PDF). Archived from the original (PDF) on 15 March 2018. Retrieved 15 March 2018.Retrieved 21 March 2018.
  5. ^ "GIC Private Limited (GIC)".
  6. ^ "Singapore's US$744 billion fund GIC eyes China's property assets". South China Morning Post. 17 December 2021. Retrieved 9 December 2022.
  7. ^ "Singapore's GIC Set to Manage Extra $137 Billion in Reserves". Bloomberg.com. 12 January 2022. Retrieved 8 December 2022.
  8. ^ "Portfolio Performance". Retrieved 21 March 2018.
  9. ^ Hamilton-Hart, Natasha (2003). Asian states, Asian bankers : Central banking in Southeast Asia. Singapore: Singapore University Press. p. 89. ISBN 9971-69-270-8.
  10. ^ "HistorySG". Government of Singapore Investment Corporation is Formed. National Library Board Singapore. Retrieved 30 May 2015.
  11. ^ Adamson, Loch (24 September 2013). "Sovereign Wealth Funds Look for Inside Edge by Managing Money In-House". Institutional Investor. Archived from the original on 6 December 2023.
  12. ^ Thal Larsen, Peter; Dickson, Martin (6 February 2008). "Transcript: Tony Tan of Singapore's Government Investment Corporate". Financial Times. Archived from the original on 10 June 2024.
  13. ^ "The Most Active Sovereign Wealth Fund Investors of 2013". Sovereign Wealth Fund Institute. 25 March 2014.
  14. ^ Lim, Kevin (11 January 2010). "GIC says booked loss from $675mln Stuyvesant investment". Reuters.
  15. ^ Bagli, Charles V.; Haughney, Christine (25 January 2010). "Wide Fallout in Failed Deal for Stuyvesant Town". NY Times. Retrieved 4 May 2010.
  16. ^ "GIC invests $14 billion in Swiss bank UBS". AsiaOne. 11 December 2007.
  17. ^ "UBS stake may be worth 70 pct less as GIC converts". Reuters. 11 February 2010.
  18. ^ Huang, Ryan (19 September 2011). "GIC defends UBS investment". ChannelNewsAsia. Archived from the original on 25 January 2012. Retrieved 29 December 2011.
  19. ^ "Citigroup". GIC homepage. 2009. Archived from the original on 22 April 2009. Retrieved 13 May 2010.
  20. ^ "GIC Pares Citigroup Stake". Bloomberg. 22 September 2009.
  21. ^ "GIC Private Limited Part of Consortium that Acquires Total’s Gas Transport and Storage Unit." Sovereign Wealth Fund Institute. 16 August 2013. Retrieved 21 August 2013.
  22. ^ a b "FY16/17 Report on the Management of the Government's Portfolio" (PDF). Archived from the original (PDF) on 15 March 2018. Retrieved 15 March 2018.
  23. ^ "Singapore's GIC takes $120 million stake in Britain's OakNorth bank". Reuters. 3 November 2017. Retrieved 30 July 2018.
  24. ^ "NBA Top Shot creator Dapper Labs raises another $250 million". 22 September 2021.
  25. ^ "GIC to buy out partner to become majority shareholder of reinsurance broker Miller". THE BUSINESS TIMES. Retrieved 11 December 2023.
  26. ^ "GIC Manages its investment portfolio for the long term". Today. 23 September 2011. Archived from the original on 15 April 2012. Retrieved 29 December 2011.
  27. ^ "Ask MOF". Singapore Ministry of Finance. 2011. Archived from the original on 21 October 2016. Retrieved 22 October 2016.
  28. ^ "Institutional Framework and Governance Structure" (PDF). 2011. Archived from the original (PDF) on 27 October 2011. Retrieved 29 December 2011.
  29. ^ "GIC Manages its investment portfolio for the long term". 23 September 2011. Archived from the original on 15 April 2012. Retrieved 29 December 2011.
  30. ^ "GIC in a risky world". Oxford SWF Project. 27 July 2011. Archived from the original on 26 April 2012. Retrieved 29 December 2011.
  31. ^ "Santiago Principles". Gic. Gic.com.sg. Retrieved 22 October 2016.
  32. ^ "GIC Private Limited". International Forum of Sovereign Wealth Fund. Retrieved 22 October 2016.
  33. ^ "Singapore's GIC: Assess Thyself!". Oxford SWF Project. 9 August 2011. Archived from the original on 30 December 2011. Retrieved 29 December 2011.
  34. ^ "GIC changes investment framework for greater flexibility". Today. 2 August 2013.
  35. ^ "GIC posts 4% real returns rate". Channel NewsAsia. 2 August 2013.
  36. ^ "Feature Article: GIC's New Investment Framework". GIC. 2 August 2013. Archived from the original on 16 September 2013. Retrieved 8 October 2013.
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