Our mission is to preserve and enhance the international purchasing power of the reserves placed under our management by delivering good long-term returns above global inflation.
In 2013, we established an investment framework to help guide us in an increasingly complex and challenging investment environment. This framework maximises GIC’s strengths, including our long investment horizon, significant capital pool, global reach, best-in-class capabilities, and robust governance structure.
Figure 1. GIC’s Investment Framework
The Client owns the funds that GIC manages and decides on the overall risk that the GIC Portfolio can take in pursuit of good long-term returns.
GIC’s investment process begins with the Policy Portfolio, which defines the key asset classes that drive the GIC Portfolio’s long-term returns. The Active Portfolio aims to add value to the Policy Portfolio through skill-based, active strategies, while preserving the exposure to systematic market risks. Together, the Policy Portfolio and Active Portfolio form the GIC Portfolio.
The Policy Portfolio represents GIC’s asset allocation strategy over the long term. It accounts for the bulk of the risk and return potential of the GIC Portfolio and seeks to balance the way different asset classes respond to different economic environments.
The Policy Portfolio comprises six asset classes: Developed Market Equities, Emerging Market Equities, Nominal Bonds and Cash, Inflation-linked Bonds, Private Equity, and Real Estate. Diversification enables the Policy Portfolio to generate good, risk-adjusted returns over a 20-year period.
The Policy Portfolio has a long investment horizon and is generally maintained through market cycles. GIC’s approach to rebalancing ensures we keep to the allocated ranges of asset classes in the Policy Portfolio. Rebalancing involves systematically buying assets that have decreased in price and selling assets that have increased in price to keep the asset composition in our portfolio steady over time. When an asset class such as equities does particularly well, the rebalancing rule compels us to sell. Conversely, when equities do poorly, such as after the burst of an economic bubble, rebalancing calls for us to buy. There will be rare occasions when GIC adjusts our Policy Portfolio’s asset allocation temporarily in response to medium-term dislocations in the global investment environment in particular assets or in countries.
Figure 2. Asset Class Distribution in the Policy Portfolio
The Active Portfolio comprises a group of investment strategies that adds value to the Policy Portfolio while broadly maintaining the same level of systematic risk.
‘Alpha’ is the additional return achieved by active strategies over and above passive buy-and-hold market returns (or ‘Beta’). At GIC, active alpha activities are separated from beta activities to manage different risk and return drivers clearly. GIC’s alpha activities aim to earn returns from our teams’ skills and competitive advantages.
Each active strategy is funded by the sale of a Policy Portfolio asset class or combination of asset classes with a similar overall risk profile. This funding is the cost of capital for the active strategy, over which the strategy is required to generate additional returns. For example, active strategies designed to outperform public equities are funded from passive public equity holdings in the Policy Portfolio. This way, passive investments in the Policy Portfolio are replaced by an active strategy with the potential for greater returns without increasing the systematic risk of the portfolio.
Figure 3. Construction of an Active Strategy from the Policy Portfolio
The illustrative active strategy “A” has a similar overall risk profile as the weighted combination of three asset classes – Developed Market Equities, Nominal Bonds, and Real Estate. Strategy “A” is therefore expected to generate a return above that of the combination.
The GIC Board sets an active risk budget that the GIC Management can use for its alpha strategies. These strategies are stress-tested so we can understand and quantify their performance under various extreme but plausible market conditions, including macroeconomic and geopolitical events. The active risk budget establishes the total level of risk for the Active Portfolio. For example, marketable alternatives or hedge funds typically invest in liquid markets and vary their market exposures via a combination of long and short positions, depending on market conditions. The risk and return profile of this strategy is similar to a combination of Developed Market Equities as well as Nominal Bonds and Cash and will be funded by these asset classes.
Through the Policy Portfolio and Active Portfolio, the GIC Portfolio is diversified across asset classes and strategies, each with a different risk and return profile. Growth assets and strategies, such as equities, generate higher returns but are riskier. Defensive assets and strategies, such as sovereign bonds, offer lower returns for lower risk and protect the portfolio in market downturns. We optimise and allocate across asset classes and strategies, integrating the best possible sources of alpha and beta using a holistic total portfolio perspective.
The GIC Portfolio is constructed to be resilient across a broad range of possible market and economic conditions, while generating good returns above global inflation in the long term.
In GIC, portfolios are constructed to give them the best chances of achieving their intended purposes over appropriate horizons and within appropriate risk limits. For the GIC Portfolio as a whole, this means achieving good long-term returns over 20 years while limiting potential downside over the shorter term.
In GIC, portfolio construction is founded on the following principles that define the fundamental basis upon which we allocate capital:
Playing to one’s strengths
We allocate to asset classes and active strategies within the GIC Portfolio according to our investment capabilities. This means putting more capital in areas where we think GIC has better access to market opportunities, better understanding and ability to structure and manage the investments, and greater confidence that our investment theses will play out.
This starts with a clear understanding of the real underlying risks of each investment in various scenarios. We then put together different combinations of investments in various amounts and stress-test their overall risk. Finally, we choose the portfolio combination that abides by our risk limits even in bad scenarios and gives us the best prospective return. Such a portfolio will invariably be diversified to a large extent, taking advantage of the fact that risks are not perfectly correlated and therefore work best in combination rather than in concentration.
Disciplined and judicious portfolio management
It is important to ensure that ongoing management of investment portfolios is disciplined and based on good analysis and judgment. The GIC Portfolio is rebalanced regularly to preserve the intended asset class mix. Actively managed portfolios are reviewed regularly in light of changing market conditions and developments in our active management capabilities.
Figure 4. Distribution of Asset Classes in the Reference Portfolio that Characterises the Client's Risk Preference
GIC’s client is the Government, who owns the funds that GIC manages and has characterised its risk preference using a portfolio of 65% global equities and 35% global bonds (“65-35”). We refer to this as the Reference Portfolio. The Reference Portfolio is not a benchmark but an expression of the overall risk that the Client is prepared for the GIC Portfolio to take.
GIC’s investment strategy is to build a portfolio comprising asset classes that can generate good long-term returns above global inflation while adhering to the Client’s risk parameters. There will be differences in exposures and the level of risk between the GIC Portfolio and the Reference Portfolio. GIC allocates to a better diversified range of assets beyond just equities and bonds. We may also adjust our level of risk in times of market exuberance or when significant opportunities arise. This is all part of a disciplined, professional approach to long-term investing.
The investment framework encapsulates the various long-term risk and return drivers for GIC. It also reflects the responsibilities of the GIC Board and Management. The Reference Portfolio characterises the Client’s risk appetite while the GIC Board approves the Policy Portfolio that is designed to deliver good long-term returns. The GIC Management is empowered to add value within the Client's risk tolerance through the Active Portfolio which comprises active, skill-based strategies.
The Investment Board provides an independent layer of oversight on GIC’s active investment management and process. Investment Board members come from the private sector and are not necessarily on the GIC Board. Together, they offer extensive experience in various types of investments across geographies. The Investment Board ensures that GIC invests in a sound and disciplined manner. It also ensures that GIC takes into account potential reputational risks arising from investment activities.
The table below summarises the governance of the investment framework:
Approves the Policy Portfolio and active risk budget.
Investment Strategies Committee
Reviews GIC Management’s recommendations on the Policy Portfolio and active risk budget.
Oversees GIC's active strategies and large investments.
Ensures GIC does not incur undue reputational risk in pursuit of returns.
Advises the GIC Board on risk matters.
Sets the overall direction of risk management policies and practices in GIC.
Reviews significant risk issues arising from GIC’s operations and investments.
Designs and recommends the Policy Portfolio.
Adds value by constructing and managing the Active Portfolio within the Client’s risk tolerance and GIC’s mandate.
Implement the Policy Portfolio and active strategies.
As a disciplined, long-term value investor, we take a systematic, patient, and diversified approach in seeking investment opportunities, differentiating between an asset’s current price and its intrinsic value.
GIC’s investing approach is underpinned by our discipline to distinguish price from value. In the short term, an asset’s price is driven largely by market sentiment, while its value lies in its fundamental worth. Anchored by this perspective, we appraise value diligently and adhere to price discipline, even when it sometimes means going against prevailing market sentiment.
To determine where true fundamental value lies, we use both top-down and bottom-up analyses. We identify and assess drivers of long-term value as a core part of our investment process. In the top-down analysis, we review a country’s macroeconomics, politics, currency, and corporate governance culture, as well as sector fundamentals such as industry structure, drivers, and trends. This top-down approach is similar for both public and private markets. Our bottom-up analyses are more varied and depend on the assets we invest in. For example, in public equities, we focus on the stock’s fundamentals such as the company’s business model and its competitive strengths, balance sheet, profitability, and management. In real estate, our teams conduct bottom-up analyses based on property-specific factors such as location, building quality, tenant mix, lease expiry profiles, and income stream outlook. Our value investing mindset is the common underlying principle.
In all our analyses, looking for value is key. To deliver good long-term returns, we consider all opportunities and risks that could drive investment value in the long run. These considerations, which include the track record, ability, and integrity of management teams and business practices, are integral to our investment process. We expect our investee companies to comply with applicable laws and regulations and apply appropriate corporate governance and stakeholder engagement practices. We also actively advocate long-term thinking in the wider community. We participate in initiatives such as Focusing Capital on the Long Term Global (FCLTGlobal), the International Forum of Sovereign Wealth Funds (IFSWF), and the Task Force on Climate-related Financial Disclosures (TCFD).
As a long-term investor with a global network, GIC is well-placed to invest in technology companies across all stages of their life cycle. Our long-term orientation and flexibility in deploying capital across private, semi-private, and public spaces enable us to grow alongside them and is further enhanced by our multi-asset experience and global footprint. We capitalise on our broad exposure to curate purposeful connections between our partners for meaningful value creation. As technology continues to progress, reshaping industries and spawning new businesses, we refine our approach to finding good companies, technologies, and business models, and apply these to our investment and organisational strategies to give us a competitive edge in today’s challenging environment.
GIC has been investing in the technology space since our founding. We started with technology companies listed on the major stock markets and then expanded into venture capital funds when we opened our San Francisco office in 1986. We went into private venture capital earlier than most other institutional investors. Our technology investments also cover all stages of the financing lifecycle of a company — seed (start-up), venture capital (growth), and IPO/public equity (maturity and exit). This has enabled GIC to build strong partnerships with leading technology investment managers and founders over the years.
We are organised to cover both strategic positioning and ground level investing. Our Technology Business Group comprises specialists from different asset classes and regions. It monitors and assesses industry trends and recommends GIC’s overall technology portfolio size, composition, and partnership strategy. Our Technology Investment Group handles most of our early stage investments through venture capital funds, co-investments, and direct investments. We also have sector specialists for public and private market investments.
Given the uncertain and rapid nature of technological disruption, we manage investment risk by diversifying our investments, maintaining a robust investment process, adhering to strict price discipline, understanding the risk-reward calculus, and sizing the investments.
We leverage our core strengths to invest in technology:
Apply a long-term, fundamentals-based approach.
Stay invested for the long term, including post-IPO for newer companies.
Broad Investment Mandate
Invest directly and through external fund managers in start-ups, growth companies, pre- and post-listed companies.
Flexibility in the capital structure, investment size, sub-sector, geography and duration of our investments.
Local presence in innovation hubs such as Silicon Valley and Beijing, complemented by our global presence through nine other offices.
Able to spot leads and lags across regions and capture unique opportunities.
Collaborative and Committed Partner
Seek to be a lifetime partner and build multiple touch points with our investee companies.
Share our insights and relationships with our investee companies and external fund managers.
Through our Bridge Forum platform, we add meaningful value by curating connections between innovative companies and our global network of corporate leaders for potential business opportunities.
At GIC, we have stepped up our operational capabilities to leverage technology more effectively to harness data, deepen insights, and sharpen our competitive edge when it comes to investing. Even then, the space continues to evolve with the consumption of increasing volume and differentiated types of data, the adoption of new quantitative analysis (including those based on machine learning), and the utilisation of quantitative insights within fundamental investment styles. To meet this changing environment, GIC has brought together quants, strats, technologists, and data scientists with the aim of increasing the use of data and analytics in our investment process and decisions. This has meant increasing ingestion, analysis, and combination of data across all industries and asset classes to enhance investment decisions and investment processes. It has also resulted in technology-led initiatives, which include the linking of research environments across asset classes to enable the easier provision of data across departments as well as the standardisation of UI/UX and back-end infrastructure. These efforts allow GIC to harness the growing complexity and power of technology and data to enable an even more agile response to emergent scenarios and deal opportunities.
At GIC, long-term portfolio construction and asset allocation are determined top-down by the Economics & Investment Strategy department, while individual investment opportunities are pursued by the bottom-up investment teams. Our core bottom-up investment groups are Public Equities, Fixed Income, Private Equity, Real Estate, and Infrastructure. In addition, our Integrated Strategies department evaluates and invests across public and private asset markets. Our External Managers department oversees external fund managers who supplement the expertise of our core internal investment groups, while the Portfolio Execution department and Investment Services teams further support the implementation of the investment decisions made.
We are open to investing in all countries outside of Singapore, but do not invest in countries that are subject to United Nations Security Council sanctions. We monitor our investee companies and exercise ownership rights, with the intent of preserving and enhancing long-term investment value and protecting the interests of the Client.
Table 1. Teams Involved in GIC’s Investment Implementation Process
Economics and Investment Strategy
Constructs long-term portfolio policy, undertakes medium-term asset allocation, and innovates alternative investment models.
External Fund Managers
Invests across developed and emerging markets in equities and fixed income, constructing a diversified portfolio to produce sustainable, risk-adjusted performance.
External Fund Managers
Invests in opportunities that have the potential to generate high long-term real returns and the ability to diversify our portfolio.
External Fund Managers
Invests in opportunities that have the potential to generate high long-term real returns and the ability to diversify our portfolio.
Invests across public and private asset markets and in less conventional investment opportunities, develops thematic investment strategies, and actively expands GIC's network of relationships beyond traditional domains.
Supports public and private market investment activities.
The Economics & Investment Strategy department articulates GIC’s strategic outlook, determines asset exposures and benchmarks, analyses and implements new return streams and investment models, and optimises the risk-reward of the GIC Portfolio. The department is responsible for GIC’s long-term Policy Portfolio and medium-term asset allocation, as well as capital allocation to internal active strategies.
GIC invests in both public and private markets. In public markets, we invest in public equities in both developed and emerging markets, absolute return strategies (hedge funds), fixed income, and cash. We manage a diversified portfolio to produce good, risk-adjusted performance. In private markets, we invest in opportunities that have the potential to generate high long-term real returns and the ability to diversify the portfolio. Real estate and infrastructure assets, in particular, also serve as a hedge against inflation.
Our equity investing effort is carried out by a team of in-house research analysts and portfolio managers. The team is organised by regions (Developed Markets, Emerging Markets, Asia) and by product groups specialising in total return, relative return, and quantitative strategies. The team conducts in-depth due diligence and research to identify businesses with the potential to generate good long-term returns.
The Fixed Income department is broadly organised along three areas: Global Macro, Global Credit, and Cross-asset Systematic investing. We invest across the entire fixed income spectrum which includes government bonds, emerging market bonds, corporate bonds and loans, convertible bonds, hybrid securities, securitised products, structured credit, and global currencies. Our multi-asset macro and systematic strategies also invest in asset classes such as equities and commodities.
The Portfolio Execution department seeks to deliver top-tier trade execution to efficiently manage total portfolio liquidity and to enhance asset utilisation. Our trading teams operate around the clock across three centres — Singapore, London, and New York — to execute investment decisions for all public market asset classes and provide timely market intelligence to investment groups. We leverage market and microstructure insights generated by our in-house research team to execute efficient trading, portfolio implementation, and rebalancing strategies. Our role encompasses trading, execution research and analytics, total portfolio rebalancing, liquidity management, equity beta replication and securities finance.
Our private equity universe includes buyouts, minority growth, pre-IPOs, venture capital, private credit, and special situations such as distressed debt, and secondary private equity. We invest in companies directly and through funds. The direct investment programme is focused on taking minority equity positions and providing junior and senior debt financing in buyouts. Our funds strategy aims to identify and invest with leading private equity, venture capital, private credit, and special situations funds globally and grow with them in the long run. We have built up a network of over 100 active fund managers. The investment teams add value to the boards and management of the investee companies by providing advice and access to a global business network.
Our Infrastructure department takes a multipronged approach to investing. We invest mainly in private infrastructure assets with a high degree of cash flow visibility and which provide a hedge against inflation. These include mature, low- to moderate-risk assets in developed markets, complemented by investments with higher growth potential in emerging markets. We also invest in infrastructure funds, non-investment grade infrastructure debt, and structured investments in listed infrastructure companies. We have a dedicated asset management team which works alongside our investment professionals and industry experts to monitor and enhance the governance and operations of our portfolio companies.
GIC was an early entrant among institutional investors in real estate. Our investments in the space now include traditional private real estate (brick-and-mortar assets), public equities, real estate investment trusts, and real estate-related debt instruments. Our real estate assets span multiple property sectors, including traditional office, retail, residential, industrial, and hospitality and newer economy sectors such as data centres, life sciences, and healthcare properties.
Through active asset management, GIC can further generate income and enhance the market value of its assets through tenant management, market positioning, leasing, and capital improvements.
Our Integrated Strategies department invests across public and private asset markets and in less conventional investment opportunities, develops thematic investment strategies, and actively expands GIC's network of relationships beyond traditional domains. Our team has developed strong relationships and invests with family offices, family-owned businesses/entrepreneurs, corporates, and individuals with specific expertise (fund-less sponsors). We also invest with differentiated fund managers. We provide bespoke solutions to our partners for various uses including growth capital, M&A financing, shareholding restructuring, etc. With a flexible investment mandate, we can invest across the capital structure and hence find the right investment structure for our partners.
External Fund Managers
GIC engages external fund managers to access investment capabilities and opportunities in various sectors and geographies. External managers enable GIC to gain exposure across public and private markets. They also provide us with valuable investment insights.
GIC has dedicated investment services departments that support public and private market investment activities. They provide support for deal closing, investment and data operations, investment reporting, management reporting, portfolio accounting, valuation, and financing.
Investing involves prudent risk-taking. Identifying and managing risk is therefore a core responsibility of every GIC employee. Each employee has individual accountability and clearly defined responsibilities within our risk management framework. This ensures that risks taken are in line with the risk tolerance set by the Client.
GIC’s risk management objectives are to protect the Client’s interests and avoid permanent impairment to the Portfolio. The objectives ensure that:
The investment strategies pursued are in line with the Client’s long-term real return objective and risk tolerance;
The risks associated with each investment are well-understood;
Policies, guidelines, and control processes are in place to reduce the likelihood of significant losses to the assets under management; and
Any reputational impact to the Client and GIC due to our actions is carefully managed.
The GIC Board provides ultimate risk oversight. The Board approves the Policy Portfolio, which is constructed with the Client’s long-term real return objective and risk tolerance in mind. Deviation of asset allocation exposure from policy benchmarks is constrained by a set of operating bands around the Policy Portfolio’s target weights. In addition, the GIC Board sets an active risk budget to limit the risk arising from the deviation of the Active Portfolio from the Policy Portfolio. The GIC Board is supported by the Board Risk Committee, which advises the Board on risk matters. The Board Risk Committee sets the overall direction of risk management policies and practices in GIC. In addition, it reviews significant risk issues arising from GIC’s operations and investments.
The Group Executive Committee is the highest management body in GIC. It deliberates on investment and risk issues before they are submitted to relevant board committees. It is also the forum that assesses and makes determinations on fiduciary risk and reputational risk issues.
The Chief Risk Officer (CRO) is a member of the Group Executive Committee and reports to the Chief Executive Officer (CEO) and the Chairman of the Board Risk Committee. The CRO is accountable to the Board of Directors, primarily through the Board Risk Committee, on all risk-related matters.
The CRO chairs the Group Risk Committee that is vested with the responsibility to oversee implementation of risk policies and review significant risk issues from investments and operations, as well as ensure the resolution of these issues.
GIC’s risk management model operates along three lines of defence, which ensures that there is clarity and transparency in risk ownership and accountability:
Figure 5. Three Levels of Risk Management
The First Line: Operating Units
People are the cornerstone of any risk management system. All GIC employees are expected to act with integrity and exercise sound judgement; they need to understand, evaluate, and carefully manage the risks they take. All operating units own and are primarily accountable for the risks inherent in their activities. They are responsible for ensuring that an appropriate risk-and-control environment and robust processes are in place as part of their day-to-day operations. Our risk assessments are forward-looking and form an important element of our long-term approach. We consider a broad spectrum of risks with potential long-term impact, including sustainability risks and risks from activities managed by appointed agents.
The Second Line: Risk Management and Control Functions
Risk management and control functions independent of the risk-taking business units are the second line of defence. They provide appropriate day-to-day risk oversight and control. These functions include risk management, legal and compliance, information and technology risk management, reputational risk management, and tax and finance. While they each have their defined set of responsibilities, they also work collectively to provide the requisite checks and balances to the risk-taking activities of GIC’s investment groups.
The Third Line: Internal Audit
Our Internal Audit Department (IAD) forms the third line of defence. IAD provides independent assessment and assurance on the adequacy and effectiveness of our internal risk management controls. It reports functionally to the Chairperson of the Audit Committee, and administratively to the CEO.
Our approach to risk management is multi-pronged to address the different types of risk faced by GIC:
Managing portfolio investment risk to ensure that any risk taken is consistent with our mandate and commensurate with expected returns;
Managing legal, regulatory, and compliance risks to safeguard the reputation and interests of the Client and GIC, and to comply with applicable laws and regulations;
Managing tax risk to ensure compliance with the tax laws of applicable jurisdictions;
Managing operational risk through an effective system of internal controls and processes to support GIC's operations;
Managing cyber security, technology, and information risk to ensure that our technology resources and information are well-protected;
Managing counterparty credit risk to minimise the impact to GIC if any counterparties were to default;
Managing reputational risk;
Managing business disruption risk; and
Managing people risk.
This multi-pronged approach to risk management, complemented by the three lines of defence, ensures that risks within the portfolio are looked at in a comprehensive manner. While risks remain, they are well-identified and managed within an established risk tolerance.
Managing Portfolio Investment Risk
Policies, guidelines, and processes are established to ensure consistency and clarity across the firm, while reducing the likelihood of significant unexpected losses to the assets under management. The policies and guidelines translate our investment mandate and risk management principles into standards that guide our day-to-day activities. For example, the group-wide investment approval framework sets out the approving authorities for investments based on size. Another example is the cost-of-capital framework which determines an appropriate performance hurdle for each active strategy that includes the cost of funding these strategies and a premium for additional risk undertaken. We identify, measure, report, and monitor all the risks that are assumed. GIC employs a suite of measures including volatility, risk concentrations, sensitivities to risk factors, liquidity profile, and expected shortfall to identify and analyse the risks in the portfolio from both top-down and bottom-up perspectives. Each measure is designed to highlight a specific aspect of the portfolio that could lead to an undesirable outcome. These statistical measures are supplemented by a set of stress tests and scenario analyses. Reverse stress tests further help to identify otherwise undetected risks that could lead to large or sustained drawdowns. The risk management function sets and monitors performance and risk review thresholds independently to highlight potential changes in risk-taking behaviour and inconsistencies with the stated risk and return assumptions.
Managing Legal, Regulatory, and Compliance Risks
Legal and regulatory risks relate to uncertainties in the interpretation and application of laws and regulations, the enforcement of rights or the management of potential litigation, and breaches in contracts, laws, or regulations. Compliance risk refers to the risk of legal or regulatory sanctions, financial penalty, or reputational damage arising from non-compliance with applicable laws and regulations.
GIC’s compliance programme comprises robust policies, procedures, effective controls, monitoring, surveillance, and the enforcement of disciplinary actions against violations or misconduct. The implementation of a rigorous compliance programme is underpinned by a strong culture of ethics, risk management, and compliance. All staff are required to observe the policies and procedures set out in GIC’s Compliance Manual (incorporating the Code of Ethics), comply with all applicable laws and regulations, uphold exemplary conduct and the highest ethical standards, and act with integrity at all times. Regular and targeted in-person and online training is conducted, and an annual Compliance and Risk Refresher Training and Quiz is administered to reinforce awareness and understanding of key compliance and corporate policies and strengthen GIC’s risk and compliance culture. The compliance programme also requires that all staff adhere to their confidentiality obligations and responsibilities.
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.
Managing Tax Risk
GIC’s Tax Governance Framework underscores our commitment to be compliant with the tax laws, rules, regulations, and obligations set by the respective governments of the jurisdictions in which we invest and operate in. We ensure that tax-related decisions are handled with professional skill, care, and diligence and with the relevant documentation that evidences the facts, considerations, and decisions taken. We seek written advice, opinion, or confirmation from independent external professional expertise, where appropriate, to substantiate our tax positions. Our tax positions and obligations are clearly represented in line with applicable tax laws and regulations. We also engage with tax authorities in an open, constructive, and professional manner.
Managing Operational Risk
All investment and operations staff are required to identify, evaluate, manage, and report risks in their own areas of responsibility and to comply with established risk policies, guidelines, limits, and procedures. For example, new investment products or strategies are subject to a risk identification and assessment process conducted by a cross-functional group. This ensures that all risks associated with the new product or activity are identified and analysed prior to investment or engagement. We must be satisfied that the required people and infrastructure, including systems, risk modelling, procedures, and controls, are in place to manage these risks before the investment is permitted. We continuously assess the control environment to ensure that any control weakness is promptly identified and addressed. Policies and procedures are established to safeguard the physical security and integrity of GIC’s technology and data assets. Throughout the year, internal and external auditors scrutinise all operations and business processes. Any deficiencies identified must be addressed within set time frames and reported to senior management.
Managing Cyber Security, Technology and Information Risk
As GIC adopts advanced information technologies (IT), we recognise the importance of having strong cyber security defences and robust internal controls for our operating environment. A dedicated team of cyber security and IT risk management professionals maintains our cyber defence capabilities, as well as oversees technology operations and the use of IT across the organisation. With the evolution of our business and the IT landscape, we continue to invest in people, processes, and tools to protect GIC’s technology resources and information. GIC also engages independent external professional expertise to augment internal resources where applicable.
Managing Counterparty Credit Risk
GIC adopts a strong control orientation in managing counterparty credit risk, trading only with financially sound and reputable counterparties. A stringent selection and approval process is in place to appoint counterparties. We review the counterparties and monitor our counterparty exposure against set limits. Counterparty profiles are regularly reported to senior management. Other measures to mitigate credit risk include using netting agreements and programmes requiring counterparties to pledge collateral.
Managing Reputational Risk
Managing reputational risk is part of GIC’s overall risk management framework. Our governance and investment processes ensure that we exercise caution and do not take on undue reputational risk in our pursuit of returns.
Managing Business Disruption Risk
We maintain a robust crisis management and business continuity programme to ensure that the organisation is well-equipped to respond to crisis events including but not limited to threats to staff safety or the continuity of GIC’s business operations. Ensuring business continuity is a coordinated effort that involves representatives from all of GIC’s offices and departments. The Business Continuity Management (BCM) Steering Committee, chaired by the Chief Operating Officer, oversees the development and review of GIC’s overall BCM framework and reports to GIC’s Group Executive Committee. The BCM Steering Committee manages crises with the BCM Working Group and local BCM Incident Management Teams which implement response activities on the ground. During a disruption, they collectively ensure consistent communication, coordination, and monitoring across GIC globally as well as timely activation of business continuity plans. Additionally, the local teams adjust and implement measures based on the latest local standards and developments. We also leverage technology for the efficient management of our business continuity programme. A standardised tool for GIC’s risk assessment is used for data collection, analysis, and development of strategies. The tool serves as the central repository for all BCM resources, enabling clarity and transparency.
GIC’s BCM programme was established in 1999. To meet evolving standards and business needs, our business continuity plans are reviewed regularly through external certifications and internal exercises. Our global programme is certified under ISO 22301, the international standard for business continuity management.
Managing People Risk
People are at the heart of our business. Our PRIME values serve as the compass in the management of our people, processes, and portfolio. The assessment of these values is included in our staff appraisals. We require our staff to conduct themselves in an exemplary manner at all times and uphold GIC’s fiduciary duty to the Client. This includes observing the applicable laws and regulations, as well as GIC’s internal policies and procedures. Consistent with our long-term orientation, GIC’s remuneration policies and talent practices support and reinforce a prudent risk-taking culture as well as recognise and reward our people on the basis of long-term results, behaviours, and PRIME values.
Retaining our organisational resilience, agility, and ability to take calculated risks are long-term critical issues. We are committed to developing our employees to their full potential through learning programmes and growth opportunities. We continue to develop a strong leadership bench for GIC, build new investment capabilities, and extend our investment and operating platforms, while reinforcing organisational culture and conduct.
Figure 6. GIC's BCM Programme
GIC's past reports are available here: https://www.gic.com.sg/reports/
GIC’s primary metric is the rolling 20-year real rate of return, which we described earlier in this chapter.
The GIC Portfolio rates of return are computed on a time-weighted basis, net of costs and fees incurred in the management of the portfolio.
Volatility is computed using the standard deviation of the monthly returns of the GIC Portfolio over the specified time horizon.
The Reference Portfolio was adopted from 1 April 2013 and reflects the risk that the Government is prepared for GIC to take in its long-term investment strategies. For more details, please refer to the chapter on “Managing the Portfolio”.
The figures exclude adjustments for costs that would be incurred when investing.
The Reference Portfolio rates of return are provided on a gross basis, i.e. without adjustment for costs and fees.
Volatility is computed using the standard deviation of the monthly returns of the Reference Portfolio over the specified time horizon.