Singapore Government Press Release
Media Division, Ministry of Information and The Arts,
MITA Building, 140 Hill Street, 2^nd Storey, Singapore 179369
Tel: 837-9666

Prime Minister

Chairman GIC

Distinguished guests

Ladies and gentlemen

Thank you for joining us for GIC’s 20^th Anniversary dinner tonight. We are delighted to welcome the people who have contributed to GIC’s development, including current and former members of the Board, representatives of the local and overseas fund management community, GIC’s business partners as well as present and former staff of GIC.

GIC has come a long way as the manager of Singapore’s foreign reserves. Starting in 1981 with a fund size of a few billion dollars, GIC now has more than US$100 billion in assets under management. This puts GIC among the 100 largest fund management companies in the world. GIC has overseas offices in key financial centres including New York, London, San Francisco, Tokyo, Hong Kong and Beijing. Its assets are invested in more than 30 countries, in a globally diversified portfolio of equities, bonds, real estate, private equity and money market instruments.

GIC’s investments have performed well. Since inception, GIC's portfolio returns have comfortably exceeded the average G3 inflation rate of about 5%, in US dollar terms. GIC has thus more than achieved its goal of preserving the purchasing power of our reserves; in fact GIC has significantly enhanced the value of our savings.

Looking ahead, GIC faces significant challenges. First, so long as Singapore continues to do well and our investments continue to prosper, the reserves to be managed by GIC should grow. Managers of large portfolios enjoy certain advantages: they can extract better terms on deals and transactions, they have access to research and information, and they are highly sought after as co-investors. They can also diversify their portfolio more widely, and employ more elaborate and analytical investment strategies. But bigger scale also means more complex and less nimble operations. Transactions to implement strategic changes in large portfolios will have greater market impact and visibility. Discipline, both in strategy and execution, becomes more crucial than ever.

Second, the global investment environment is undergoing rapid, profound change. Information and analysis are instantly and copiously available. New and ingenious derivatives offer more opportunities for arbitrage and hedging. A development in one market affects other markets in other countries within minutes. Investment management companies are reorganising into global businesses, so as to diversify their risks and maintain a globally optimised investment stance.

Few fund managers will concede that these changes have made it impossible for them to beat the market consistently. But certainly outperforming the market is now much more difficult. Paradoxically, more information has made it harder to anticipate which way the next shock will push the markets. And more efficient markets mean that arbitrage opportunities are more fleeting, and the margins narrower. Players who fail to react quickly to sudden changes and instabilities in the environment pay a high price.

To meet these challenges, GIC must build a resilient organisation, tightly run and founded on sound values. GIC has identified as its corporate values integrity, teamwork, performance, long-term orientation and prudence. GIC takes these values seriously:

• GIC expects each and every staff to be unflinchingly honest, abiding by its code of ethics and the highest standards of professional conduct;
• GIC stresses teamwork in a collegial working environment, motivating innovative and creative thinking and enabling all staff to perform to their full potential;
• GIC strives to continually improve performance, recognising and rewarding excellence;
• GIC takes a long-term view in its investment decisions, aiming for sustained good performance rather than bursts of short-term gains. Every officer is valued as an investment, and the company works to build long-term relationships with valued business partners; and
• GIC is conscious that it bears a broader fiduciary responsibility than most fund managers. So it must consider both investment and reputation risks, and exercise sound judgment and discretion in its decisions.

To become an outstanding organisation, GIC needs outstanding people. It needs to tap talent everywhere and understand markets around the world. GIC will attract as many capable Singaporeans as it can, but it will never have enough talented Singaporeans to meet GIC’s needs. For the best possible performance, GIC must assemble the strongest international team it can find.

This competition for talent is tougher than ever before. The market for top talent is now global, especially in financial services. The opening of financial markets in Latin America, Eastern Europe and South East and North East Asia will only intensify this worldwide shortage of financial talent. In Singapore too, MAS is actively liberalising financial markets and developing the fund management industry, thus increasing demand for good analysts and fund managers. GIC will have to compete harder against top financial institutions for local and foreign talent.

GIC is government-owned and manages government funds, but it is not a closed bureaucracy. GIC is run on meritocratic principles, with an open and cosmopolitan outlook. Non-Singaporeans and Singaporeans alike are recruited, evaluated and compensated competitively based purely on performance.

GIC must continue to strive to be a top-notch organisation, offering attractive, satisfying career prospects for top talent. Its culture must motivate talented people, enabling them to contribute meaningfully and meeting their professional and personal aspirations. An ambitious and promising young fund manager must see having GIC on his or her CV as a valuable plus.

GIC offers investment professionals broad opportunities to enlarge their skills and exposure. Few fund managers can match the asset class diversity and global coverage of GIC. With its policy of empowering its professionals as much as possible, GIC gives portfolio managers and analysts the chance to exercise discretion and manage considerable portfolios very early in their careers.

Over the years, GIC has assembled a highly competent team of professionals, Singaporean and non-Singaporean. Today, over 40% of GIC professionals are foreigners, including Americans, Europeans and nationals from many Asian countries. They bring with them valuable networks of contacts, and knowledge of the countries GIC invests in. They have served GIC professionally and loyally. GIC must strengthen its team further, and continue to recruit both in Singapore and abroad, to become an organisation of excellence.

Even as GIC strives to build its in-house capabilities, it seeks to tap the ideas and expertise of outstanding global fund managers. One way it does so is by placing out funds to external fund managers. This also helps to diversify our fund management risks, and to build up the fund management industry in Singapore.

Fund managers must on their own be able to attract funds to manage. They cannot rely solely on funds from the Singapore government. But GIC mandates will provide fund managers in Singapore with an initial source of business, and encourage them to invest in infrastructure, build up their teams, and expand.

GIC has therefore been placing out a larger proportion of its funds to external fund managers. Starting in 1998, GIC sought to place out a total S$25 billion, over 3-4 years, to fund managers with Singapore offices, comprising both global and regional mandates. To date, a total of S$19 billion has been placed out to Singapore-based fund managers.

But of course this will not be all. As GIC’s assets under management grow, GIC will continue to put out more funds to external managers. We are therefore happy to have with us tonight, representatives of the external fund managers whom GIC has worked closely with. We look forward to developing an even closer relationship with you.

GIC’s vision is to become a truly Singapore-based multinational. It aspires to be a world-class global investment management company, viewed by global talent as a desirable employer, and one which allows talent to develop to their potential. It is an ambitious vision. But GIC’s first 20 years has put in place a good foundation, and positioned the company well to meet these future challenges.

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