Government of Singapore Investment Corporation
Encyclopedia
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. With a network of eight 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, making it the world's third largest sovereign wealth fund.
In addition to GIC, the Government of Singapore owns another sovereign wealth fund, Temasek Holdings
, which manages about US$142b of assets.
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.
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.
In 2008, GIC invested US$6.88bn for a 9% stake in Citigroup
. 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.
In the wake of the subprime mortgage crisis
, GIC's annual report revealed that its portfolio lost more than 20% of its value (from March 2008 to March 2009), with the 20-year nominal annual rate of return dropping to 5.7% in US dollar terms. In 2010, it reported that these losses were "largely offset" due to the economic recovery in Asian markets, with the 20-year nominal annual rate of return rising to 7.1% in US dollar terms.
Sovereign wealth fund
A sovereign wealth fund is a state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments. Sovereign wealth funds invest globally. Some of them have grabbed attention making bad investments in several Wall Street financial...
established by the Government of Singapore
Government of Singapore
The Government of Singapore is defined by the Constitution of the Republic of Singapore to mean the Executive branch of government, which is made up of the President and the Cabinet of Singapore. Although the President acts in his personal discretion in the exercise of certain functions as a check...
in 1981 to manage Singapore
Singapore
Singapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...
's foreign reserves. With a network of eight offices in key financial capitals around the world, GIC invests internationally in equities, fixed income
Fixed income
Fixed income refers to any type of investment that is not equity, which obligates the borrower/issuer to make payments on a fixed schedule, even if the number of the payments may be variable....
, money-market instruments, real estate
Real estate
In general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...
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
The Economist
The Economist is an English-language weekly news and international affairs publication owned by The Economist Newspaper Ltd. and edited in offices in the City of Westminster, London, England. Continuous publication began under founder James Wilson in September 1843...
reported that Morgan Stanley
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
had estimated the fund's assets at US$330 billion, making it the world's third largest sovereign wealth fund.
In addition to GIC, the Government of Singapore owns another sovereign wealth fund, Temasek Holdings
Temasek Holdings
Temasek Holdings is an investment company owned by the government of Singapore. With an international staff of 380 people, it manages a portfolio of about S$193 billion at end of March 2011, focused primarily in Asia...
, which manages about US$142b of assets.
Controversial investments
Traditionally, GIC has kept a low profile in its investments. During the subprime mortgage crisisSubprime mortgage crisis
The U.S. subprime mortgage crisis was one of the first indicators of the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages....
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.
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.
In 2008, GIC invested US$6.88bn for a 9% stake in Citigroup
Citigroup
Citigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...
. 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.
Performance
Over a period of 25 years to March 2006, the annual rate of return on the foreign reserves managed by GIC averaged 9.5% in US dollar terms, and 8.2% in Singapore dollar terms. The average rate of return over global inflation was 5.3% per annum, in accordance with GIC's mandate of preserving the international purchasing power of Singapore's reserves.In the wake of the subprime mortgage crisis
Subprime mortgage crisis
The U.S. subprime mortgage crisis was one of the first indicators of the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages....
, GIC's annual report revealed that its portfolio lost more than 20% of its value (from March 2008 to March 2009), with the 20-year nominal annual rate of return dropping to 5.7% in US dollar terms. In 2010, it reported that these losses were "largely offset" due to the economic recovery in Asian markets, with the 20-year nominal annual rate of return rising to 7.1% in US dollar terms.