The Government of Singapore Investment Corporation (GIC): Managing Sovereign Wealth – Structure, Investments, and Global Impact

The government of Singapore Investment Corporation (GIC) plays a pivotal role in managing Singapore’s sovereign wealth fund, officially known as GIC Private Limited. Established in 1981, GIC has transformed into a significant player in global financial markets, prioritizing aggressive investments in higher yielding asset classes over an extended investment horizon.

GIC, as one of three reserves management entities in Singapore alongside the Monetary Authority of Singapore (MAS) and Temasek Holdings, carries a vital responsibility in managing the financial assets of the Singaporean government. Operating as a sovereign wealth fund, GIC’s mandate is to invest for the long-term, with a primary focus on preserving and enhancing the international purchasing power of the funds under its management. As of mid-2018, GIC controls the eighth largest sovereign wealth fund globally, with assets totaling $390 billion.

The inception of GIC in 1981 marked a strategic move by the Singaporean government to actively manage its financial reserves. Over the years, GIC evolved its approach, becoming more assertive in pursuing higher returns through diversified investments. This evolution reflects a dynamic response to the changing landscape of global finance and the need for innovative investment strategies.

GIC manages funds on behalf of two clients: the government of Singapore and the Monetary Authority of Singapore. The unique structure of GIC, designated as a “Fifth Schedule” corporation in Singapore, introduces distinctive features. Notably, the approval of the President of Singapore is required for certain actions, such as the appointment and removal of directors and key managers. Additionally, the financial statements of GIC undergo scrutiny by the government of Singapore’s auditor-general. The board comprises both government-affiliated figures and independent directors from the private sector, fostering a balanced decision-making process.

Similar to other sovereign wealth funds, GIC’s holdings encompass a diverse range of financial assets. A noteworthy characteristic is the significant internal management of the portfolio, with an estimated 80% of the fund being driven by in-house strategies. This approach aligns with a historical preference for maintaining a low profile but being opportunistic, as demonstrated during the 2007-2010 U.S. housing crises. The fund strategically balances internal management capabilities with external opportunities to optimize returns and mitigate risks.

While the GIC does not provide exact fund details in its annual profit and loss disclosures to safeguard Singapore’s financial reserves, it does disclose performance metrics over specific periods. Over the 20-year period ending March 2019, GIC achieved an annualized rate of return of 3.4% above global inflation. This impressive performance underscores GIC’s successful stewardship in nearly doubling the international purchasing power of the reserves during this timeframe.

In 2008, GIC played a pivotal role in developing the Santiago Principles, a set of 24 guidelines aimed at promoting good governance, accountability, transparency, and prudent investment practices for sovereign wealth funds (SWFs) and recipient countries. This collaborative effort, alongside entities such as the Abu Dhabi Investment Authority and the U.S. Treasury, laid the foundation for a stable and open investment climate. Today, over 20 member SWFs, including GIC, adhere to the Santiago Principles, showcasing GIC’s commitment to global financial stability and responsible investment practices.

GIC contributes to global financial stability through its active adherence to the Santiago Principles, which promote good governance, transparency, and responsible investment practices for sovereign wealth funds. This commitment fosters a stable and open investment climate globally.

GIC’s designation as a “Fifth Schedule” corporation in Singapore is significant as it introduces unique features, including the requirement for the approval of the President of Singapore for certain actions. This ensures a structured and accountable decision-making process within the fund’s corporate governance framework.

GIC strategically balances internal and external management of its portfolio. While around 80% of the fund is managed internally, the remaining portion is open to external opportunities. This approach aims to leverage internal expertise while capitalizing on external market dynamics for optimal returns and risk management.

No, GIC is a sovereign wealth fund managing the financial reserves of the Singaporean government. It is not open for individual investments, as its mandate revolves around preserving and enhancing the international purchasing power of government funds.