The GIC Journey
The GIC Journey offers insights into the history of GIC and examines the ways that we strive always to be “in time for the future”.
Setting The Foundation
GIC was the brainchild of Dr Goh Keng Swee, then Deputy Prime Minister and Chairman of the Monetary Authority of Singapore (MAS). He saw the need for an entity dedicated to the task of investing Singapore’s growing reserves for better long-term returns, Dr Goh created what in retrospect, was the prototype sovereign wealth fund.
GIC began operations in 1981 when international financial markets were stressed by high US interest rates and a sovereign debt crisis. Nevertheless, the Board and management focussed on the tasks of developing organizational and investment capabilities. GIC was then able to capitalise on the subsequent phase of disinflation that had an important effect on the value of financial assets, especially bonds and equities.
On Black Monday in October 1987, triggered by a 508-point fall in the Dow Jones Industrial Average, global stock markets tumbled. It was GIC’s baptism of fire to financial market turbulence but it vindicated GIC’s asset allocation policy and the tactical adeptness of its investment teams.
Expanding Investment Horizons
GIC first embarked on a policy shift from developed markets towards emerging markets in Asia in the 1990s. The real estate and private equity investment groups were corporatised to facilitate their growth and to take advantage of opportunities in the emerging markets. Our overall exposure to emerging markets is about one-fifth of the entire portfolio today.
The 1990s had its share of financial market crises. The Asian Financial Crisis in particular was a regional financial tsunami, engulfing in its wake regional stock markets, currencies, property markets and banking systems. GIC’s diversified portfolio stood the test. GIC also did not waver from its conviction of the long-term growth potential of the region. To improve on its feel for the region, the Board inducted new Directors from the private sector who had regional business interests.
Strengthening Investment and Organizational Capabilities
The period witnessed internal reviews to strengthen investment and organization capabilities. In 2003, GIC embarked on an extensive internal review of its investment process and governance framework. The result was a sharper definition of its investment objectives and risk tolerance parameters, and an enlarged policy asset mix better geared to the varied investment opportunities around the world.
This was also a period of restructuring to improve responsiveness to a more challenging investment environment. The development of organizational leadership and succession planning became a key focus.
Of the several financial market troubles in the 2000s, the global financial crisis of 2008-2009 towered them all. An early decision to sell down equities protected the portfolio, which has now returned to its normal allocation and more than recovered its losses.
Preparing for the Future
GIC continues to grow its investments in the emerging economies. GIC set up business groups for China, India and Latin America to focus on investment opportunities in these target markets.
GIC also saw a slate of leadership changes and renewal. Founding Chairman, Mr Lee Kuan Yew, retired from the Board and took on the role of Senior Advisor. Deputy Chairman and Executive Director, Dr Tony Tan Keng Yam, also stepped down to be available for public office. GIC appointed new senior management to lead its three investment groups. Despite the unusually large number of leadership changes, the transition has been smooth due to the availability of well-qualified successors.
