Government of Singapore Investment Corporation
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| Type | Sovereign wealth fund |
|---|---|
| Industry | Fund Management |
| Founded | 22 May 1981 |
| Headquarters | Singapore |
| Key people | Lee Hsien Loong, Chairman Lim Siong Guan, Group President |
| Products | N/A |
| Revenue | N/A |
| Website | www.gic.com.sg |
The Government of Singapore Investment Corporation Private Limited (GIC) is a sovereign wealth fund established by the Government of Singapore in 1981 to manage Singapore's foreign reserves. 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. With a network of nine offices in key financial capitals around the world, GIC invests internationally in equities, fixed income, money-market instruments, real estate and special investments.
GIC's investment portfolio is managed by its three subsidiaries: GIC Asset Management Pte Ltd (public markets), GIC Real Estate Pte Ltd and GIC Special Investments Pte Ltd (private-equity investments). In 2008, The Economist reported that Morgan Stanley had estimated the fund's assets at US$330 billion,[1] making it the world's third largest sovereign wealth fund.[2]
In addition to GIC, the Government of Singapore owns another sovereign wealth fund, Temasek Holdings, which manages about US$142b of assets.
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[edit] High-Profile Investments
Traditionally, GIC has kept a low profile in its investments.[3] During the subprime mortgage crisis of 2007-2010, however, a number of its investments attracted controversy.
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.[4][5]
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.[6][7] 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.[8]
In 2008, GIC invested US$6.88bn for a 9% stake in Citigroup.[9] In 2009, it pared its stake to less than 5%, realizing a $1.6 billion profit, with another $1.6 billion paper profit on its remaining holding.[10]
[edit] Performance
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.[11]
At year end March 2011, the 20-year annualised real rate of return, in excess of global inflation, was 3.9%. The 20-year nominal annualised rate of return was 7.2% in US dollar terms.
Starting 2011, GIC also published the 5-year and 10-year nominal rates of return to provide a sense of the on-going 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.
The 5-year annualised return in USD terms was 6.3% net of fees with a volatility of 12%, while the 10-year annualised return was 7.4% with volatility 10%. These compare against a 5-year annualised return of 5.3% and 4.9% before fees for the two composite portfolios, which also had higher volatilities of 13.4% and 15% respectively. For the 10-year annualised return, the figures were 6.5% and 6.3% for the two composite portfolios with volatilities of 11.2% and 12.6% respectively.[12]
[edit] Governance and risk management
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, health care and physical environment.[13]
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 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 audit of the Government and other bodies managing public funds.[14]
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, too, is 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.[15] Its approach to “risk management” has three distinct components: portfolio risk; process risk and people risk.[16]
As a member 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.[17]
[edit] References
- ^ "Asset-backed insecurity". The Economist. 2008-01-17. http://www.economist.com/finance/displaystory.cfm?story_id=10533428.
- ^ "Sovereign Wealth Funds: Shrek or White Knight?". The Economic Observer. 2008-02-27. http://www.eeo.com.cn/ens/feature/2008/02/27/92907.html..
- ^ http://www.ft.com/cms/s/0/7b0549f4-d0f1-11dc-953a-0000779fd2ac.html#axzz1C0umyeng
- ^ Lim, Kevin (2010-01-11). "GIC says booked loss from $675mln Stuyvesant investment". Reuters. http://www.reuters.com/article/idUSSGE60A0EF20100111.
- ^ Bagli, Charles V.; Haughney, Christine (2010-01-25). "Wide Fallout in Failed Deal for Stuyvesant Town". NYTimes. http://www.nytimes.com/2010/01/26/nyregion/26stuy.html. Retrieved 2010-05-04.
- ^ "GIC invests $14 billion in Swiss bank UBS". AsiaOne. 2007-12-11. http://www.asiaone.com/News/The+Straits+Times/Story/A1Story20071211-40492.html.
- ^ "UBS stake may be worth 70 pct less as GIC converts". Reuters. 2010-02-11. http://www.reuters.com/article/idUSSGE61A0CJ20100211.
- ^ Huang, Ryan (2011-09-19). "GIC defends UBS investment". ChannelNewsAsia. http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1154179/1/.html.
- ^ "Citigroup". GIC homepage. 2009. http://www.gic.com.sg/newsroom_newreleases_150108%20-%20GIC%20invests%20USD%206.88bn%20in%20Citigroup.htm.
- ^ "GIC Pares Citigroup Stake". Bloomberg. 2009-09-22. http://www.bloomberg.com/apps/news?pid=20601080&sid=aalfuzelYF94.
- ^ "GIC Manages its investment portfolio for the long term". Today. 2011-09-23. http://app.mof.gov.sg/newsroom_details.aspx?type=forum&cmpar_year=2011&news_sid=20110923697233305980.
- ^ "GIC Newsroom". 27 Jul 2011. http://www.gic.com.sg/newsroom/news/article/26-Jul-2011.
- ^ "http://www.ifaq.gov.sg/mof/apps/fcd_faqmain.aspx". 2011. http://www.ifaq.gov.sg/mof/apps/fcd_faqmain.aspx.
- ^ "Instituional Framework and Governance Structure". 2011. http://www.gic.com.sg/data/pdf/B_Institutional_framework_and_governance_structure.pdf.
- ^ "GIC Manages its investment portfolio for the long term". 2011-09-23. http://app.mof.gov.sg/newsroom_details.aspx?type=forum&cmpar_year=2011&news_sid=20110923697233305980.
- ^ "GIC in a risky world". Oxford SWF Project. 2011-07-27. http://oxfordswfproject.com/2011/07/27/gic-in-a-risky-world/.
- ^ "Singapore's GIC: Assess Thyself!". Oxford SWF Project. 2011-08-09. http://oxfordswfproject.com/2011/08/09/singapores-gic-assess-thyself/.
