GIC, Temasek returns ‘reasonable and within expectations’: Jeffrey Siow

Key Concepts

• GIC: Government of Singapore Investment Corporation – Singapore’s sovereign wealth fund focused on preserving and enhancing international purchasing power.
• Tomasic: (Likely a reference to Temasek Holdings) – Another Singaporean sovereign wealth fund, operating with a different mandate and risk profile than GIC.
• Mandate: The specific instructions and objectives given to a fund manager (GIC or Tomasic) by the government.
• Risk Profile: The level of risk a fund is authorized and expected to take in pursuit of its returns.
• International Purchasing Power (IPP): The ability of a country’s wealth to buy goods and services internationally.
• Fiscal Position: The overall financial health of the government, including its assets, liabilities, and revenue.

Government Assessment of GIC and Tomasic Performance

The government evaluates the performance of GIC and Tomasic independently, based on their individual mandates and accepted risk profiles, rather than comparing them directly to each other. This assessment prioritizes long-term performance over short-term gains or losses, acknowledging the inherent volatility of investment markets. The core principle guiding this evaluation is not achieving consistently high year-on-year returns, but rather ensuring adherence to established objectives within defined risk parameters.

GIC’s Mandate and Performance

GIC’s specific mandate is to “preserve and enhance the international purchasing power of the assets under its management.” This means the focus isn’t simply on nominal returns, but on maintaining or increasing Singapore’s ability to acquire goods and services globally. The government considers the returns generated by GIC to be “reasonable and within expectations” given this mandate and its associated risk profile. Regular reviews of GIC’s mandate and performance are conducted to adapt to evolving global economic conditions and investment landscapes.

Short-Term Volatility and Government Capacity

The government recognizes that GIC’s returns, particularly over shorter timeframes, may be low or even negative due to the uncertain and volatile nature of investment markets. However, the government possesses a “strong balance sheet” and a “substantial buffer of net assets” which allows it to absorb these short-term fluctuations without compromising its financial stability. This financial strength is crucial, as it enables the government to meet its financial obligations and maintain a “strong fiscal position.”

Fiscal Underpinning and Risk Absorption

The government’s significant net asset buffer isn’t merely a safety net; it actively enables the government to fulfill its liabilities. This capacity to absorb risk is a key component of Singapore’s overall financial strategy. The ability to withstand short-term market downturns without impacting essential government functions is directly linked to the size and stability of these net assets.

Long-Term Perspective and Continuous Review

The government’s approach emphasizes a long-term perspective, acknowledging that investment performance will fluctuate. The commitment to regularly reviewing mandates and performance ensures that GIC and Tomasic remain aligned with Singapore’s evolving economic needs and global investment realities. This proactive approach is designed to safeguard the nation’s financial future.