“But the unique thing is not what most people see. And they recognize that the default position is for GIC to earn this long-term risk premium. Of the three, GIC is the one that most resembles the classic sovereign wealth fund model: diversified across multiple asset classes, investing purely overseas and with a mandate to beat inflation. What Is the Revenue Regulation Fund (RRF)? That said, GIC’s long-term return – its main performance metric is a 20-year annualized return – was 3.4% above global inflation up to March 31, 2018. GTI Capital Group, Equity International and IFC ( a member of the World Bank Group) are the … “The guys are working day and night 24/7. Agarwal was principal at public market fund Westbridge Capital. GIC now considers six core asset classes: nominal bonds and cash; inflation-linked bonds; developed market equities; emerging market equities; real estate; and private equity. The city/state of Singapore has two wealth funds, holding more than $800 billion in total. By using Investopedia, you accept our. Seconded from his job as vice-chairman of OCBC, which he had one day been expected to run, he was already taking a pay cut to do this new public-service job. This sets GIC’s asset allocation strategy over the long term. But even during those times we learned: how do you pick the right startup, the right entrepreneur, the right business model?”. But since the NIRC involves investing returns, not the funds that were deployed in order to gain the returns, this doesn’t affect the fund’s liquidity position or require it to change its long-term approach. Although the GIC has the usual corporate structure it has two unique features due to its status as a "Fifth Schedule" corporation in Singapore. Generally, Lim and his staff are at pains to point out that GIC is just a fund manager on behalf of its client – the government: “We don’t get involved in the spending. The Mumtalakat Holding Company is a government-owned investment organization that manages the sovereign wealth fund for the Kingdom of Bahrain. Infrastructure has that particular challenge.”. Good behaviour will be rewarded. “That,” says one employee, “is a burden I don’t wish to carry.”. The GIC was formed in 1981 with the aim to invest the sovereign wealth fund more aggressively in higher yielding asset classes and over a longer investment horizon. Nguyen Le Quoc Anh, chief executive of Techcombank, told Euromoney at the time of the bank’s IPO in 2018 that GIC’s knowledge was helpful: “We said [to GIC]: ‘We know how to run a bank, but we need a portfolio company to tell us what else is going on in the region.’”, Lim says: “We are largely a financial investor, so our help a lot of the time is at the governance level and in introducing, sharing our network with our investees. Internally, the process of taking the money out of beta and into an active position is known as skill-based strategies. If it revealed precise values, the fund would unnecessarily expose the full size of Singapore's financial reserves, making it easier for speculators to speculate against the Singapore dollar during periods of market and economic vulnerability. And not just with Singaporeans: I find it interesting and amazing that a lot of our non-Singaporean colleagues identify with the idea that you would patiently, in a disciplined way, manage a pool of money that would benefit a lot of people.”, Did he feel that way in 1993? “All this geopolitical stuff. GIC is a global long-term investor with well over US$100 billion in assets in over 40 countries worldwide. First, the approval of the President of Singapore is required to take certain actions, such as the appointment and removal of directors and key managers. Fifty years of Asia: The region that roared, The profiles: 23 of the biggest names in Asia, Asia '97: The financial crisis that left its mark for good, How Asia's banks fight back against disruption, The bondholder treatment at the heart of the Petropavlovsk brawl, Societe Generale details equity derivatives cuts, Locals dismiss positive thoughts on Argentina’s banks, Capital markets: Litigation funding finds its feet, Finance and Covid-19: The biggest dangers lurk in risk-free markets, Modern Slavery Act Transparency Statement. Then there are a series of building blocks. Singapore's Richest. We were fortunate that since the 1980s, or even earlier, all this politics didn’t really matter. “I wouldn’t be too concerned about that. The … As a sovereign wealth fund, the GIC's mandate is to invest for the long-term to preserve and enhance the international purchasing power of the funds placed under its management. “But thankfully, in our case, being early in a number of areas has been quite good.”. The Santiago Principles are now observed by more than 20 member SWFs, including GIC. Most of the portfolio is managed internally, with an estimated 80% of the fund driven by in-house management. Few internally even know the magic number. “Because of the long relationship, our collaborations with them typically would be closer and better than others. Being in San Francisco in 1986 has allowed for a good education. Global SWF is an innovative and comprehensive Data Platform that tracks over 400 Sovereign Wealth Funds (“SWFs”) and Public Pension Funds (“PPFs”) and provides insights into the portfolios and personnel of the Top 100 of them, in terms of size… We are very careful and conscientious in succession planning, making sure one generation passes to the next in a fairly deliberate manner.”. I won’t tell our guys they are cheap, but it does.”. They need to know how to work out the regulation, to assemble the assets, to make the financing arrangements, a lot of those things that are still somewhat lacking.”. And how do internal managers feel about it? “Not just that, but it has to be big. “There is a cost to it: the opportunity cost of foregoing beta and the riskiness of the investment. (InRev, a European association for investors in non-listed real estate vehicles, publishes an annual ranking of property holdings at investment managers, based on public information, which is why GIC isn’t in the ranking. A number of the GIC's directors and key officers are prominent current or former members of the Government of Singapore, while others are independent directors appointed from the private sector. “I guess being early is not always the best thing,” says Lim. During the 2007-8 crisis, Middle East sovereign wealth funds stepped in, buying stakes in important financial institutions and providing needed capital, but registering deep losses. This is not exceptional and well below the almost 6% it stood at in 2001, although this is partly a result of the tech stock boom in the late 1990s gradually falling from the long-term numbers, with the post-bubble declines still there. As a starting point, you have to justify the right to invest any capital at all. “Having a lot of very strong relationships helps, because in most cases we partner with general partners, family offices, even corporates.” That helps to gain access to asset classes where there is a great deal of demand. The government has used this contribution for 11 years, principally to top up endowment and trust funds, and it is now the single largest contributor to government revenues, worth S$17.17 billion to the 2019 budget. GIC has hired Aditya Agarwal to head its new fund as managing director and is looking to a mid-2021 launch. Conventional sovereign wealth funds such as Singapore’s Temasek Holdings and Norway’s Government Pension Fund invest overseas, relying on state assets such as foreign exchange reserves, accumulated trade surpluses and natural resource exports. We work to secure Singapore’s financial future by investing across a range of asset classes in the public and private markets. TORONTO, Dec. 1, 2020 /PRNewswire-HISPANIC PR WIRE/ -- Sovereign Pacific Capital, an Asia wealth and asset management organization establishes a USD $500M Sovereign Pacific Fund… Back when Yong Pung How stepped out of his impressive OCBC career to start GIC with no chair there was a clear sense of public duty about the fund. After all, they exist somewhere between the murky grey of return-maximizing, mega-cap asset managers, and clandestine government agencies quietly used to further sovereign agendas. “I think they recognize that at the end of the day a pool of capital has different uses. New Delhi: Singapore's sovereign wealth fund GIC is in advanced talks to acquire 'significant' equity in Goldman Sachs backed hotel development and investment firm SAMHI, people familiar with the matter said. The amount that is taken is published in each year’s government budget. “Money comes back. ... " The fund comes at … In that month, the Norwegian Government Pension Fund was the largest sovereign wealth fund (SWF) globally, with managed assets amounting to almost 1.2 trillion U.S. dollars. The Mubadala Development Company is a sovereign wealth fund that now operates as the Mubadala Investment Company. Please read our. So why do so much internally? But sometimes better can mean lower risk.”. The finance minister at the time, Tharman Shanmugaratnam, made it clear this would not be a regular occurrence. Lim exemplifies this sense of institutional learning. He called it “exceptional measures for exceptionally dangerous times”. As a sovereign wealth fund, the GIC's mandate is to invest for the long-term to preserve and enhance the international purchasing power of the funds placed under its management. It might well be one of the biggest too, but the government does not disclose the fund’s assets under management (AuM), reasoning that to do so would be to reveal the size of Singapore’s financial reserves and make it easier to mount speculative attacks on the Singapore dollar. It’s hard,” Lim says. Professionally it has not hindered our work.”. Our job is to make sure that we generate good long-term returns. The largest is the Government of Singapore Investment Corporation, now the GIC Private Limited fund. The most unique thing is the governance arrangement. The real challenge is the investment environment.”, The government itself addresses this in a statement: “By basing the government’s spending on expected long-term returns of the investment entities on the framework, the investment entities [Temasek, GIC and MAS] are not pressured to sell assets, realize capital gains and pay more dividends.”. It is not easy to be a portfolio manager at GIC. It is Africa's second-largest government investment fund. “We provide the platform for them to do that.”. Euromoney starts by asking Lim about one of GIC’s key differentiators in the sovereign wealth world: being a first mover in many themes. Nowhere else is like Singapore, with three separate sovereign institutions with distinct mandates. But this time we truly have the prospect of politics going to extremes, and that is going to have a significant impact on economies and asset prices.”. “Being there, you have more natural exposure to technology investment,” says Lim. Asked if he wants to say anything in conclusion, he turns again to the environment of uncertainty in the world today. The Sovereign Wealth Center research group puts the group AuM figure at $398 billion.). The 2012 investment review brought about a change in approach. GIC invested in Bridgewater itself early on. Their job – their key performance indicator, their bar – is to do better than what they have foregone. Groups like Wellington Management and Bridgewater Associates first came to Singapore to service GIC, subsequently diversifying their client list from there. Since their formal arrival on the investment scene in the 2000s, sovereign wealth funds (SWFs) have been met with a healthy mix of curiosity and trepidation. The fund is now officially named: GIC Private Limited. ‘Better’ typically means more return. Currently the ranges within it are 25% to 30% nominal bonds and cash, 20% to 30% developed market equities, 15% to 20% emerging market equities, 11% to 15% private equity, 9% to 13% real estate and 4% to 6% inflation-linked bonds. A Sovereign Wealth Fund (SWF) Is Used to Benefit a Country's Economy. We use cookies to provide a personalized site experience. More than one manager has told Euromoney how it pitched up to GIC with its best idea only to find that it was already doing it, and doing it well, internally. For example, it is one of the largest real estate managers in the world, despite the fact that real estate should only represent 8% to 13% of the portfolio – and that makes it difficult to keep allocations in some asset classes as high as GIC would like them to be. Next is the policy portfolio. The funds come from the high savings and investment rates of the people and businesses in this world-class financial center. Along with the Abu Dhabi Investment Authority (Adia) and Norway’s Government Pension Fund Global, it is perhaps the most closely watched, admired and emulated sovereign fund in the world. It is not a benchmark as such, but it represents the overall risk tolerance GIC thinks appropriate in order to generate good long-term returns over global inflation. It is considered one of the most sophisticated and influential sovereign wealth funds globally. GIC has what it calls a reference portfolio, made up of 65% global equities and 35% global bonds. “You said earlier that GIC seems to be unique,” he adds. “But still, it is a struggle, partly because competition is very keen. Small; Medium; Large; ... said its new venture fund has raised Rs 375 crore from Singapore’s sovereign wealth fund Temasek. GIC Private Limited (GIC) is a Sovereign Wealth Fund located in Singapore, Singapore Singapore, Asia, and was founded in 1981. One day in May 1981, Yong Pung How turned up for his first day as managing director of a new Singapore sovereign wealth fund, although it didn’t yet have a name and nobody had ever heard of a sovereign wealth fund. It is perhaps a particularly difficult time to do that. It is somewhat notorious among external managers for its internal knowledge. The Government of Singapore Investment Corporation (GIC) is one of three financial entities that manages the financial assets of the government of Singapore. Cases in point: Was their mass rescue of the West’s banks—Citi, Merrill Lynch, UBS, and Morgan Stanley—during the 2008 financial crisis a collective invest… GIC Private Limited, formerly known as Government of Singapore Investment Corporation, is a sovereign wealth fund established by the Government of Singapore in 1981 to manage Singapore's foreign reserves. The Revenue Regulation Fund (RRF) is the sovereign wealth fund of the nation of Algeria. A good example is Vietnam. GIC was an early investor in Techcombank and in January took its stake in Vietcombank to 2.55% following a private placement, having been an early investor beforehand. It is for information only. “Beta has done great for the last 10 years,” Lim says. So, what makes a bankable project? The Kuwait Investment Authority is a government-owned corporation responsible for managing the sovereign wealth fund of Kuwait. Singapore is still an intensely patriotic place and GIC has retained a sense of public duty, no matter how many non-Singaporeans have come and gone through its doors over the years. That is a significant benefit.”. But it has increased and Lim expects it to continue to do so: “The odds seem quite good, I would say, because there are quite a few of these big events in the world that could drive volatility higher.”. Although it publishes a detailed annual report, GIC doesn’t talk a great deal and Euromoney’s interview with chief executive Lim Chow Kiat has been a long time in negotiation.