GIC's 2022 Self Assessment 2022 | International Forum of Sovereign Wealth Funds

Santiago Principles Self-Assessment

GIC Private Limited

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Pillar 1: Legal
Pillar 2: Institutional
Pillar 3: Investment

Principle 1

1. The legal framework for the SWF should be sound and support its effective operation and the achievement of its stated objective(s).

1.1. The legal framework for the SWF should ensure legal soundness of the SWF and its transactions.

1.2. The key features of the SWF’s legal basis and structure, as well as the legal relationship between the SWF and other state bodies, should be publicly disclosed.

GIC’s legal framework is detailed in the Singapore Companies Act, under which GIC was incorporated in 1981. GIC is wholly owned by the Government of Singapore. An Investment Mandate from the Government to GIC sets out the terms of appointment, investment objectives, investment horizon, risk parameters and investment guidelines for managing the portfolio.

The Singapore Companies Act is available at

Companies Act 1967 - Singapore Statutes Online (agc.gov.sg)

GIC’s legal relationship with the Government of Singapore is disclosed on our website and in our Annual Reports.

GIC is a fund manager for the Government of Singapore. We do not own the assets that we manage. As a rule, GIC invests outside Singapore.

The Government, represented by the Ministry of Finance (MOF), mandates GIC to manage all assets in a single pool, on an unencumbered basis and without regard to their source, with the objective of achieving good long-term real returns. The Government gives GIC an investment mandate that stipulates the terms of appointment, investment objectives, risk parameters, investment horizon, and guidelines for managing the reserves.

https://www.gic.com.sg/who-we-are/our-governance/

Principle 2

The policy purpose of the SWF should be clearly defined and publicly disclosed.

GIC is one of the three investment entities in Singapore that manage the Government’s reserves, alongside the Monetary Authority of Singapore (MAS) and Temasek.

GIC’s purpose is clearly defined; we aim to achieve good long-term returns for the Government - a reasonable risk-adjusted rate above global inflation over a 20-year investment horizon. By achieving these returns, we meet our objective to preserve and enhance the international purchasing power of Singapore's foreign reserves. The reserves provide a stream of income that can be spent or invested for the benefit of present and future generations.

GIC’s policy purpose is publicly available at:

https://www.gic.com.sg/who-we-are/

https://www.mof.gov.sg/policies/reserves/what-comprises-the-reserves-and-who-manages-them

Principle 3

3. Where the SWF’s activities have significant direct domestic macroeconomic implications, those activities should be closely coordinated with the domestic fiscal and monetary authorities, so as to ensure consistency with the overall macroeconomic policies.

As a rule, GIC invests outside Singapore, in line with our mission to preserve and enhance the international purchasing power of these reserves. Hence, this principle does not apply to GIC.

https://www.gic.com.sg/newsroom/

Principle 4

4. There should be clear and publicly disclosed policies, rules, procedures, or arrangements in relation to the SWF’s general approach to funding, withdrawal, and spending operations.

4.1. The source of SWF funding should be publicly disclosed.

4.2. The general approach to withdrawals from the SWF and spending on behalf of the government should be publicly disclosed.

GIC’s source of funds is disclosed on our website and in our Annual Report. The sources of the Government’s assets, as stated by the MOF, including proceeds from the issuance of Government debt, Government surpluses and proceeds from the Government’s land sales.

https://report.gic.com.sg/governance.html

The Constitution of Singapore stipulates a spending rule that determines how much of the investment returns on its reserves the Government can spend. The spending rule allows up to 50% of the long-term expected real return on the net assets invested by GIC, the Monetary Authority of Singapore and Temasek Holdings, to be taken into the Government’s annual budget.

https://www.mof.gov.sg/policies/reserves/what-comprises-the-reserves-and-who-manages-them

Principle 5

5. The relevant statistical data pertaining to the SWF should be reported on a timely basis to the owner, or as otherwise required, for inclusion where appropriate in macroeconomic data sets.

GIC provides monthly and quarterly reports to the Accountant-General Department within the Ministry of Finance. These reports list the financial transactions, as well as the holdings, and bank account balances. The reports provide detailed performance and risk analytics as well as the distribution of the portfolio by asset class, country, and currency.

Principle 6

6. The governance framework for the SWF should be sound and establish a clear and effective division of roles and responsibilities in order to facilitate accountability and operational independence in the management of the SWF to pursue its objectives.

The Investment Mandate from the Government to GIC sets out the terms of appointment, investment objectives, investment horizon, risk parameters and investment guidelines for managing the portfolio. The Government, which is represented by the Ministry of Finance in its dealings with GIC, neither directs nor interferes in GIC's investment decisions. It holds the GIC Board accountable for the overall portfolio performance.

GIC is accountable in various key areas to the President of Singapore as a Fifth Schedule company. The Constitution empowers him to obtain information to enable him to safeguard the country's reserves.

The Board is ultimately responsible for asset allocation and for the performance of the portfolio under management. It is accountable to the Government for the effective management of the reserves in accordance with the Investment Mandate.

Board committees oversee critical areas: on investment policy, risk, audit, and human resources. External advisers with global experience in the investment industry serve on the investment and risk committees to provide external perspectives and ideas from their areas of expertise.

The Auditor-General, who is appointed by the President of Singapore, submits an annual report to the President and Parliament on his audit of the Government and other bodies managing public funds.

https://www.gic.com.sg/who-we-are/our-governance/

https://report.gic.com.sg/governance.html

Principle 7

7. The owner should set the objectives of the SWF, appoint the members of its governing body(ies) in accordance with clearly defined procedures, and exercise oversight over the SWF’s operations.

GIC’s objectives are set out by the Government and are detailed in GAPP 2 above. Representing the Government (who is also the fund owner), the Ministry of Finance ensures that a competent Board is in place. No one may be appointed to or removed from the GIC Board without the concurrence of the President of Singapore, who is independent of the Government and must not be a member of any political party. This provides an additional layer of oversight.

https://www.gic.com.sg/newsroom/

https://www.gic.com.sg/who-we-are/our-governance/

https://report.gic.com.sg/governance.html

Principle 8

8. The governing body(ies) should act in the best interests of the SWF, and have a clear mandate and adequate authority and competency to carry out its functions.

The Board is accountable to the Government for the effective management of the reserves in accordance with the Investment Mandate.

GIC is a private limited company wholly owned by the Government. The Ministry of Finance, representing the Government, ensures that a competent Board of Directors is in place; GIC helps by suggesting qualified candidates.

As a Fifth Schedule Company, as defined in the constitution of Singapore, the appointment, removal or renewal of members of the GIC Board requires the approval of the President of Singapore. Such approval will be preceded by advice from the Council of Presidential Advisers (CPA), following their scrutiny of any proposals, with final approval resting solely with the President. This ensures that GIC appoints only people of integrity who are competent and can be trusted to safeguard these assets.

In addition, external advisers with global experience in the investment industry also serve on the Board’s investment strategies committee and risk committee to provide external perspectives and ideas from their areas of expertise.

https://www.gic.com.sg/newsroom/

https://www.gic.com.sg/who-we-are/our-governance/

https://report.gic.com.sg/governance.html

Principle 9

9. The operational management of the SWF should implement the SWF’s strategies in an independent manner and in accordance with clearly defined responsibilities.

The Government, which is represented by the Ministry of Finance in its dealings with GIC, neither directs nor interferes in GIC’s investment decisions. It holds the GIC Board accountable for the overall portfolio performance. The management executes investment strategies, is responsible for all investment transactions and reports regularly to the Board and the Government.

https://www.gic.com.sg/who-we-are/our-governance/

https://report.gic.com.sg/governance.html

Principle 10

10. The accountability framework for the SWF’s operations should be clearly defined in the relevant legislation, charter, other constitutive documents, or management agreement.

GIC’s accountability framework is defined in our Investment Mandate, the Constitution of Singapore, and the Singapore Companies Act.

The Investment Mandate from the Government to GIC sets out the terms of appointment, investment objectives, investment horizon, risk parameters and investment guidelines for managing the portfolio.

GIC was incorporated in 1981 under the Singapore Companies Act. The Companies Act and GIC's Memorandum and Articles of Association state how the board of GIC is to be set up, and other matters pertaining to the governance of GIC and the board members. The Memorandum and Articles of Association are legal documents which all companies incorporated under the Companies Act must-have.

https://www.gic.com.sg/who-we-are/our-governance/

https://report.gic.com.sg/governance.html

https://sso.agc.gov.sg/Act/CONS1963

https://sso.agc.gov.sg/Act/CoA1967

Principle 11

11. An annual report and accompanying financial statements on the SWF’s operations and performance should be prepared in a timely fashion and in accordance with recognized international or national accounting standards in a consistent manner.

GIC provides monthly and quarterly reports to the Accountant-General within the Ministry of Finance. These reports list the financial transactions, as well as the holdings, and bank account balances. The reports provide detailed performance and risk analytics as well as the distribution of the portfolio by asset class, country, and currency. Once a year, the management meets the Minister for Finance and his officials formally to report on the risk and performance of the portfolio in the preceding financial year.

GIC's first annual report on the management of the Government’s portfolio was published in 2008.

https://report.gic.com.sg/governance.html

https://www.gic.com.sg/newsroom/reports/

Principle 12

12. The SWF’s operations and financial statements should be audited annually in accordance with recognized international or national auditing standards in a consistent manner.

The main companies in the GIC group and the Government’s portfolio managed by GIC are independently audited by the Auditor-General, in addition to being audited by GIC’s internal audit department. Public accounting firms audit other companies in the group and the investment holding companies.

The Auditor-General submits an annual report to the President and Parliament on his audit of the Government and other bodies managing public funds.

The President, rather than the government appoints the Auditor-General to safeguard his independence, as the Government’s accounts are subject to his audit. There are also provisions in the Constitution of the Republic of Singapore to ensure that his remuneration cannot be reduced and to protect him from being removed except based on adjudication by an independent panel. This is to ensure that he can audit without fear or favour.

https://report.gic.com.sg/governance.html

https://sso.agc.gov.sg/Act/CONS1963?ProvIds=pr148F-&ViewType=Advance&Phrase=procedure&WiAl=1

Principle 13

13. Professional and ethical standards should be clearly defined and made known to the members of the SWF’s governing body(ies), management, and staff.

We require our staff to observe GIC’s code of ethics, maintain exemplary conduct, and comply with laws and regulations, including prohibitions against insider trading and other unlawful market conduct. These are among the guidelines set out in our compliance manual maintained by the legal and compliance department. Staff must protect confidential information and handle material non-public information with due care. The manual also states policies relating to the management of conflicts of interest, gifts and entertainment, copyright rules, personal investments and whistle-blowing. We provide regular training to all staff to keep them current with compliance requirements.

https://report.gic.com.sg/managing-the-portfolio.html#managing-risks

Principle 14

14. Dealing with third parties for the purpose of the SWF’s operational management should be based on economic and financial grounds, and follow clear rules and procedures.

External managers are chosen for their ability to exploit investment opportunities beyond GIC’s current skill sets and to complement our internal management capability.

Requests for proposals and assessment of the proposals are done in a fair manner and follow internal operating policies and procedures.

https://report.gic.com.sg/managing-the-portfolio.html#investment-process

Principle 15

15. SWF operations and activities in host countries should be conducted in compliance with all applicable regulatory and disclosure requirements of the countries in which they operate.

GIC complies with the appropriate regulatory and disclosure requirements in the countries in which we invest.

The investment and operations teams collaborate with the legal and compliance function to manage legal, regulatory, compliance, and reputational risks arising from the group’s investment and operational activities. The legal and compliance function monitors compliance with applicable laws and regulations, including but not limited to: laws on securities trading and investment, competition law requirements, financial crimes and sanctions compliance, licensing, and regulatory approvals and reporting. Emerging legal and regulatory issues and proposed regulatory changes are also closely monitored. Additionally, the in-house legal team works with external lawyers to address legal risks.

https://report.gic.com.sg/managing-the-portfolio.html#managing-risks

Principle 16

16. The governance framework and objectives, as well as the manner in which the SWF’s management is operationally independent from the owner, should be publicly disclosed.

The GIC annual report and GIC’s website disclose the governance framework of GIC and the investment objectives of the fund and how GIC is operationally independent of the owner.

https://www.gic.com.sg/who-we-are/our-governance/

https://report.gic.com.sg/governance.html

https://www.gic.com.sg/who-we-are/

Principle 17

17. Relevant financial information regarding the SWF should be publicly disclosed to demonstrate its economic and financial orientation, so as to contribute to stability in international financial markets and enhance trust in recipient countries.

The GIC annual report is published via the website, to give the international community a better appreciation of the context and circumstances in which GIC operates, and to assure that GIC invests only to achieve financial returns sustainably.

GIC discloses relevant information to demonstrate its economic and financial orientation. The GIC annual report describes GIC’s investment objectives, legal and corporate governance framework, investment approach, as well as risk management framework.

GIC has taken further steps in the direction of increased transparency over the years. Beginning in 2011, GIC publishes the nominal returns and annualised volatility of these returns over 5-year, 10-year and 20- year horizons, in addition to the 20-year real return disclosed since 2008.

https://www.gic.com.sg/newsroom/reports/

Principle 18

18. The SWF’s investment policy should be clear and consistent with its defined objectives, risk tolerance, and investment strategy, as set by the owner or the governing body(ies), and be based on sound portfolio management principles.

18.1. The investment policy should guide the SWF’s financial risk exposures and the possible use of leverage.

18.2. The investment policy should address the extent to which internal and/or external investment managers are used, the range of their activities and authority, and the process by which they are selected and their performance monitored.

18.3. A description of the investment policy of the SWF should be publicly disclosed.

GIC’s investment policy and activities are anchored by the policy portfolio. It defines the asset classes that GIC invests in, and how it allocates funds to these asset classes. The purpose is to meet the investment return objective within the risk tolerance determined by the Government as the owner of the funds.

Investment decisions comply with prescribed guidelines and limits to ensure that they keep within the Investment Mandate from the Government. At all levels of investment decision making, the risks taken by our portfolio managers and their investment results are constantly monitored. Clear mandates are provided to internal and external managers, stating the range of their activities and authority. In addition, the independent risk and performance management department regularly monitor the portfolio’s performance, risk and asset exposures against the approved thresholds and limits.

The allocation between internal and external managers is based on the principle of best sourcing. These managers are selected for their ability to exploit investment opportunities beyond GIC’s current skill set and to complement GIC’s internal management capability.

https://report.gic.com.sg/managing-the-portfolio.html#managing-risks

https://www.gic.com.sg/our-policy-portfolio/

https://www.gic.com.sg/how-we-build-our-portfolio/

Principle 19

19. The SWF’s investment decisions should aim to maximize risk-adjusted financial returns in a manner consistent with its investment policy, and based on economic and financial grounds.

19.1. If investment decisions are subject to other than economic and financial considerations, these should be clearly set out in the investment policy and be publicly disclosed.

19.2. The management of an SWF’s assets should be consistent with what is generally accepted as sound asset management principles.

We do not invest other than for economic and financial considerations.

Principle 20

20. The SWF should not seek or take advantage of privileged information or inappropriate influence by the broader government in competing with private entities.

GIC does not have, nor does it seek, access to privileged information or inappropriate influence through the Government. The Government neither directs nor interferes in GIC’s investment decisions. GIC’s compliance manual for staff further provides a framework to prevent access to and use of privileged information.

Principle 21

21. SWFs view shareholder ownership rights as a fundamental element of their equity investments’ value. If an SWF chooses to exercise its ownership rights, it should do so in a manner that is consistent with its investment policy and protects the financial value of its investments. The SWF should publicly disclose its general approach to voting securities of listed entities, including the key factors guiding its exercise of ownership rights.

Consistent with our portfolio management approach, GIC will exercise ownership rights in our investments, where appropriate, to protect the financial interests of the assets under our management. Financial considerations guide our general approach to the exercise of our ownership rights.

Principle 22

22. The SWF should have a framework that identifies, assesses, and manages the risks of its operations.

22.1. The risk management framework should include reliable information and timely reporting systems, which should enable the adequate monitoring and management of relevant risks within acceptable parameters and levels, control and incentive mechanisms, codes of conduct, business continuity planning, and an independent audit function.

22.2. The general approach to the SWF’s risk management framework should be publicly disclosed.

Identifying and managing risk is a clear and integral part of management responsibility at all levels in GIC. The risk management framework sets the accountability and responsibility parameters for risk-taking. In addition to the Board and its risk committee, different bodies and groups are specifically charged with the task of identifying, analysing, monitoring, reporting and on-the-ground managing of risks.

Our approach to risk management is three-pronged: managing portfolio risk to ensure appropriate and efficient risk-taking; managing process risk so that investment decisions are implemented well, and managing people risk.

https://www.gic.com.sg/how-we-invest/risk-management/

https://report.gic.com.sg/managing-the-portfolio.html#managing-risks

Principle 23

23. The assets and investment performance (absolute and relative to benchmarks, if any) of the SWF should be measured and reported to the owner according to clearly defined principles or standards.

Our assets and investment performance (absolute, and relative to benchmarks if any) are measured and reported to the owner according to clearly defined principles or standards.

GIC provides monthly and quarterly reports to the Government through the Accountant-General of Singapore. These reports contain the financial statements, holdings and bank account balances of GIC. They also provide detailed performance and risk analytics, as well as the distribution of the portfolio by asset class, country, and currency.

Once a year, the GIC Management formally meets the Minister for Finance and his officials to report on the risk and performance of the portfolio in the preceding financial year.

https://report.gic.com.sg/governance.html

Principle 24

24. A process of regular review of the implementation of the GAPP should be engaged in by or on behalf of the SWF.

GIC regularly reviews our implementation of the GAPP, and we have published our assessment in this report.

International Forum of Sovereign Wealth Funds

Santiago Principles Self-Assessment

GIC Private Limited

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