GIC - The Singapore Investment Corporation

 

WHAT IS THE GIC - THE SINGAPORE INVESTMENT CORPORATION

The Singapore Investment Corporation (GIC) is one of the biggest players in the global capital market. First of all, GIC is Singapore's sovereign wealth fund. GIC setted up to organize foreign exchange reserves and fiscal surplus. In other words, it is a fund invested by the government.

BACKGROUND HISTORY

 It is the first time the Singapore government thought up GIC in the 1970s. During that time, the government of Singapore was making a surplus in the public sector. The financial reserve was steadily increasing. But, there was no agency in charge of this money, so the Monetary Authority of Singapore (MAS) managed the money instead.

The Monetary Authority says investing in short-term assets managed the money. The idea was to manage funds from a long-term perspective rather than a slapstick. After accepting Goggen Swee's opinion, then Prime Minister Lee Kuan Yew established GIC in 1981. Then directly chaired the board of directors for 30 years until 2011.

IMPACT ON POPULATION 

GIC has made it a top priority to benefit its citizens. The establishment and operation body is the Singapore government. Proceeds from the investment could put it back into the same place or finance the country's operations. As such, it could help businesses that need national investment, such as medical care, transportation infrastructure, and R&D.

The GIC introduction page proudly says the Singaporean government will not have to raise taxes or borrow additional money to finance it. However, The Singaporean government says to have withdrawn about $11 billion of the reserves, it prepared through GIC and others to overcome COVID-19. In short, for Singapore, GIC is an important pillar of national finance.

HOW BIG IS THE GIC FUND THAT SINGAPORE RAISED WITH ITS NATIONAL LUCK?

Global SWF, a research firm, released data on the size of major sovereign wealth funds around the world as of August this year. According to the announcement, the largest sovereign wealth fund in the world is the Norwegian Central Bank's Investment Management Division (NBIM). Its operating scale is about 1.36 trillion dollars. From 2nd to 5th, China, Kuwait, the United Arab Emirates, and Hong Kong are in that order. Then, in sixth place is GIC. It is known that GIC rolls $545 billion a year. If so, how much does GIC really earn?

SITUATION IN NOW

GIC has returned 6.8% per year in nominal USD terms over the past 20 years. Adjusting for global inflation, the annual 20-year real return is 4.3%. But, the rate of return is high compared to the recent high-performance venture funds. It is difficult for GIC to pitch a high risk high return style. It is the inherent characteristic of sovereign wealth funds.

FOR FUTURE

As the people's future is money at stake, risk should be as low as possible. 

In fact, the late former Prime Minister Lee Kuan Yew, who served as the GIC chairman for over 30 years, said this. “GIC began in a turbulent international financial market. Since the 1973 oil crisis, oil prices have risen eightfold and some Latin American countries are on the verge of default.” 

“Amid these serious risks to global payments, GIC’s primary goal was not to maximize returns”

“The goal of GIC was to protect the value of savings and obtain a fair return on capital.” GIC is paying attention to three recent trends. The first is 'technological innovation' that will unfold after the pandemic. Expectations are major changes will occur in the existing business models such as finance, medical, automobile, energy, and infrastructure industries as technology advances. That's why we'll focus on examples or solutions of science, technology, and engineering that can be commercialized.

SUSTAINABILITY

Regarding this, GIC says:

“We expect consumer preferences and government policies to continue to emphasize the importance of climate-friendly practices.” 

“As long-term investors, we will protect our portfolio assets from negative impacts.”

“And I will invest in this trend.”

 The word 'ESG' has become a global topic for several years.

After all, the world will want 'good companies', which means that we have to pay attention to good companies to make a return on our investment.

 Finally, GIC speaks of geopolitical variables. Recently, as competition between major powers has intensified, it has emerged as a trend to consider when investing. The term was referring to the battle for supremacy between the United States and China. As the competition between the US and China is getting fiercer. It is an important variable to consider when investing .For future, the Singapore Investment Agency hopes that any investment will lead to revitalization of the startup ecosystem.

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