The Government of Singapore Investment Corporation (GIC) is one of the world’s least known but most powerful equity investors. While a private corporation, GIC is a wholly owned subsidiary of the Government of Singapore and governed by a board of directors headed by the President of the Republic of Singapore, who has ultimate authority for GIC’s board selection and budget. By the 20th anniversary of the corporation in 2001, GIC managed more than $100 billion in assets around the world with partners including, but not limited to, Morgan Stanley, Deutsche Bank, Bridgewater Associates, Capital Group International, American International Group, Merrill Lynch, UBS and Goldman Sachs.
The story of GIC is a remarkable one. Spun out of the Central Bank of Singapore, GIC has grown its assets from the low billions of dollars in the 1970s to an asset base that represents the future of a tiny nation with few natural resources beyond a highly educated and motivated population of less than 5 million people. While the GIC is little known outside of the financial arena, its influence and position as a role model for other countries who similarly lack natural endowments or those who wish to emulate this nation, provide it with a global status that is unparalleled. Given the precarious nature of Singapore and the geo-politically tentative nature of its existence, GIC is a role model for a host of other small nations of the developing world with large fiscal resources. Dubai, Abu Dhabi Qatar, Brunei and even the Republic of Ireland are several of the countries that have followed the growth of asset management carefully.
In 1971 as the Central Bank of Singapore began accumulating reserves due to the nation’s productive fiscal management, the thrift of its hardworking population (few nations people’s other than Japan save more money per capita), and increasing balance of trade surpluses. The decision was made to move management of the country’s capital reserves to the Monetary Authority of Singapore (MAS), which in turn decided to evolve the investment policy for the country’s reserves beyond investment into sovereign bonds among the G7 nations into high-grade corporate bonds. In the decade from 1971 to 1981 the country’s assets grew even larger.
By 1981 the country’s leadership took the bold step of forming the GIC with the explicit goal of increasing the return on the country’s reserves in the areas of public equities, real estate and special opportunities. It was another bold decision by the government, in this case to begin actively managing the growing reserve assets of a nation. Among GIC’s benchmark investments during the early 1980s were an expansion into U.S. public equities, an investment in Kohlberg, Kravis, Roberts & Co.’s first buyout fund, and a host of investments in early venture capital funds run by Sequoia Capital, Matrix Partners, TA Associates, Summit Partners and Walden International, to name a few.
GIC was put to the test on Oct. 17, 1987, Black Monday, as its traders watched the value of GIC’s assets tumble in a single day. Using their global time zone advantage (New York was closed and London was yet to open for another day), GIC’s asset managers worked through a long night shifting assets into the bond market, a move that would repay the losses that GIC suffered in the stock market.
Not every decision in those times was astute. For example, through a distribution of Cisco shares by Sequoia, GIC realized a gain of about $8 million from an initial investment of $100,000. But if it had held onto those shares they would have been worth more than $1 billion by 2001.
Sufficient smart decisions were made so that by the early 1990s, GIC’s SI group was investing $200 million annually into special investments and had expanded its operations into Europe and Asia. Today it has a staff of more than 100 people spread across six countries.
GIC reorganized in 1999 into three separate companies with distinct investment mandates: GIC Investment Corp. (public equities, bonds and mutual funds), GIC Real Estate, and GIC Special Investments (SI). SI oversees all private equity deals, with investments in buyouts, special situations (including distressed debt) and venture capital. It is sub-divided into four groups that oversee three buyout funds separated by geography (Asia, Europe and the United States) and one global venture capital fund managed from the United States.
SI has 14 investment professionals divided evenly between venture capital and buyout specialists. The bulk of the team works out of Redwood Shores, Calif.
The question as to whether this small nation can actively plan its way to a Switzerland-like status, in which its financial and human resources are globally competitive, remains to be seen. But as its 20th anniversary report states, GIC is well on its way to creating a financial management industry based in Singapore, with investments of $17 billion in 53 Singapore-based fund managers. In addition the group has helped lure benchmark financial advisors into the country including Mercer, Towers Perrin and Watt Wyatt.
For a nation that must barter with other nations for every resource, beginning with things as basic as its water supply, its possible success is more than a matter of academic achievement for Singapore.