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Forum Replies

GIC manages its investment portfolio for the long term

23 Sep 2011

We thank Mr Chua Soo Kiat for asking why GIC does not disclose the amount of funds that it manages and its annual profit and loss, unlike MAS and Temasek (TODAY 21 Sep).

MAS as Singapore’s central bank holds our Official Foreign Reserves (OFR), which are for publication. Temasek manages its own assets, and publishes their full value together with other details on its financial statements. It obtains credit ratings and issues bonds to other investors on the basis of this information.

GIC manages the Government’s assets. We have publicly stated that it manages well over US$100 billion of assets. However, revealing the exact amount would, taken together with the published assets of MAS and Temasek, expose the full size of Singapore’s financial reserves.

This is against our national interest. It would make it easier for speculators to attack the Singapore dollar during periods of vulnerability. Further, our reserves are a strategic asset, especially for a small country with no natural resources or other assets. It would be unwise to reveal the exact amount at our disposal for defending our currency, or for use in an emergency.

How well GIC performs is not a secret. GIC’s mandate is to preserve and enhance the international purchasing power of the reserves over the long term. Hence it publishes its 20 year annualised real rate of return. GIC also reports its returns over 5 and 10 year periods, as intermediate measures of its performance.

Mr Chua asked what is being done to “prevent a collapse in value” should crisis hit again. 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.

GIC is a long-term investor, prepared to ride out cycles and disruptions in global markets. It keeps a watchful eye on potential economic and financial dislocations, and develops contingency plans to deal with various scenarios. Making major changes to its asset allocation with every prospective downturn and upturn would impair its performance and reduce its advantage as a long term investor.

Mr Chua also alluded to the President’s role in his letter. We would like to clarify that the President does not oversee the investment strategies of GIC, MAS or Temasek. Their investments are managed professionally and independently, and the respective boards are accountable for their overall investment performance. The President’s role is to decide, after consulting the Council of Presidential Advisers, whether to approve the appointments of board members and the CEOs.

Further information on these and other questions pertaining to our reserves is available on the MOF website.

Lim Bee Khim (Ms)
Director (Corporate Communications)
Ministry of Finance