Sound principles, sound investing practices

GIC serves as a board member of International Forum of Sovereign Wealth Funds (IFSWF), a voluntary group of Sovereign Wealth Funds (SWFs). The IFSWF meets, exchanges views on issues of common interest, and facilitates an understanding of the Santiago Principles and SWF activities. In March 2008, GIC participated in the pioneering effort alongside Abu Dhabi Investment Authority and the US Treasury to develop the 9 Generally Accepted Principles & Practices for SWFs and recipient countries. These principles were the foundation of the Santiago Principles published by the International Working Group (IWG) of SWFs and countries in October in the same year.

The Santiago Principles is a voluntary set of 24 principles and practices designed to address protectionist fears and maintain an open and stable investment climate. These principles are now observed by more than 20 member SWFs, including GIC. GIC’s implementation of the Santiago Principles can be grouped into the following three key areas:

A. Legal framework, objectives, and coordination with macroeconomic policies

Guiding philosophy
Sound practices and principles in this area underpin a robust institutional framework and governance structure, and facilitate the formulation of appropriate investment strategies, consistent with the SWF’s stated policy objectives.

GIC’s Implementation
GIC’s legal framework is set out in the Singapore Companies Act, and our legal relationship with the government is explained in our annual reports and on our website. GIC’s objectives are clearly spelt out in line with our responsibility to preserve and enhance the international purchasing power of Singapore’s foreign reserves. As GIC invests mostly outside Singapore, the principle of domestic macroeconomic policy coordination is not applicable.

More implementation details here.


B. Institutional framework and governance structure

Guiding Philosophy
A sound governance structure that separates the functions of the owner, governing body(ies), and management, facilitates the SWF management’s operational independence to pursue investment decisions and investment operations free of political influence.

GIC’s Implementation
The Investment Mandate from the government to GIC clearly defines GIC’s terms of appointment, investment objectives, investment horizon, risk parameters and investment guidelines for managing the portfolio. The government, represented by the Ministry of Finance in its dealings with GIC, neither directs nor interferes in GIC's investment decisions, but it holds the board accountable for overall portfolio performance. The management executes investment strategies, is responsible for all investment transactions, and reports regularly to the board and the government. GIC is also accountable in various key areas to the President of Singapore, as a Fifth Schedule company. The role of the President of Singapore in safeguarding reserves is further elaborated in the reserves management framework on the Ministry of Finance’s website.

More implementation details here.


C. Investment and risk management framework

Guiding Philosophy
A clear investment policy shows an SWF’s commitment to a disciplined investment plan and practices, while a reliable risk management framework promotes the soundness of its investment operations and accountability.

GIC’s Implementation
GIC is committed to a disciplined investment plan and practices, anchored in our policy portfolio which defines our strategic asset allocation to meet our investment return objective, within risk parameters determined by the government. Identifying and managing risk is a clear and integral part of management responsibility at all levels. 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.

More implementation details here.

For a print-friendly complete version of the Santiago Principles, please click here.