Who Manages the Reserves?

Audit

MAS' financial statements are audited by the Auditor-General. The main companies in the GIC Group and the Government's portfolio managed by GIC are also audited by the Auditor-General.

To enable him/her to do his work without fear or favour, the position of the Auditor-General is safeguarded under the Constitution – the appointment and removal of the Auditor-General is subject to President’s concurrence.

Temasek's consolidated financial statements are audited by leading international audit firms. In addition, Temasek's financial performance is analysed by bond rating agencies, which have given it a AAA credit rating.

Performance

GIC

GIC's mandate is to achieve good long-term returns, to preserve and enhance the international purchasing power of Government reserves.

GIC publishes an annual report on the performance of the Government's portfolio. The information below is extracted from “Report on the Management of the Government's Portfolio" for the Year 2023/24.

GIC's mandate to achieve good long-term returns above global inflation is represented by the primary metric for evaluating GIC's investment performance – the rolling 20-year real rate of return. Over the 20-year period that ended 31 March 2024, the GIC Portfolio generated an annualised real return of 3.9%. The 20-year annualised real rate of return metric is the key focus for GIC, which matches its mandate and investment horizon.

GIC also discloses the nominal rates of return over 5-year, 10-year and 20-year periods. These time frames give a sense of the ongoing performance of the portfolio. The 5-year and 10-year rates of return serve as intermediate markers of GIC's longer term investment performance.

Table 1 below shows the portfolio's annualised nominal rates of return over the 5-year, 10-year and 20-year periods in USD terms and the corresponding portfolio volatility.

Over the 20-year, 10-year and 5-year periods ending March 2024, the GIC Portfolio returned 5.8%, 4.6%, and 4.4% per annum in nominal USD terms, in line with the broader asset markets.

GIC also monitors the performance of a Reference Portfolio which comprises 65% global equities and 35% bonds. The Reference Portfolio is not a performance benchmark for the GIC Portfolio, but serves as a reference for its portfolio risk. It also does not include adjustments for costs that would be incurred when investing.

Table 2 below shows the Reference Portfolio's annualised nominal rates of return over the 5-year, 10-year and 20-year periods in USD terms and the corresponding portfolio volatility. 

Over the three time periods, and particularly over the last five years, the GIC Portfolio had lower volatility than the Reference Portfolio due to its diversified asset composition and pre-emptive measures to lower portfolio risk. Despite this lower risk exposure than the Reference Portfolio, the GIC Portfolio has performed creditably over a 20-year period. For more information, click here.

Temasek

Temasek's aim is to maximise shareholder value over the long term. A significant portion of Temasek's portfolio is invested in Singapore. However, since 2002, Temasek has taken active steps to invest in Asia and other markets.

Temasek publishes an annual report that discloses its annual portfolio value as well as its performance returns – Total Shareholder Returns ‒ over the last 1 year, 10 years, 20 years, 30 years, 40 years and since inception.

Temasek's financial performance is scrutinised by bond rating agencies, which have given it AAA rating. Temasek's financial statements are audited by an international audit firm.

Temasek's Total Shareholder Returns (since inception, and over the last 10 years and 20 years) as at 31 March 2024 are shown in the chart below.

More information on Temasek's performance can be found in the Temasek Review 2024.

As at 31 March 2024, Temasek's Total Shareholder Return since inception (1974) was 14% p.a. in SGD terms. This TSR since inception would have benefited from the transfer of Government companies such as SingTel to Temasek, their transformation, and the subsequent listing of these assets.

Temasek published information on this issue in 2014⁶:

(a) Performance of Temasek's newer vintage investments (made after 31 March 2002)

• Since 2002, it became an active investor in Asia and other markets as part of its strategy to reshape its portfolio for the longer term.
• Its investments in external markets have provided a boost to Temasek's long-term returns. This portfolio of newer vintage Temasek investments has delivered an annualised return of 15% to Temasek in SGD terms from 1 April 2002 to 31 March 2014.

(b) Performance of its older vintage investments (held as at March 2002)

• The older vintage portfolio of Temasek companies benefited from, as well as contributed to, Singapore's transformation and growth in the earlier years. Companies like SingTel and PSA have contributed to a competitive and efficient infrastructure for the Singapore economy. Through Temasek's stewardship and management of these assets, the Government has been able to unlock and grow their value.
• The transfer of Government companies such as SingTel to Temasek ‒ and the subsequent listing of these assets ‒ had contributed to Temasek's total shareholder returns by market value.
• For the period after 1 April 2002, the performance of this portfolio of earlier Temasek assets did not have any “boost” from IPO listings. These earlier assets have continued to perform well relative to the markets, showing annualised returns of 11% in SGD terms from 1 April 2002 to 31 March 2014. Over the same period, the MSCI Singapore Index showed annualised returns of 7% in SGD terms (inclusive of reinvestment of dividends).

Temasek has performed creditably over the long term. Temasek's consolidated financial statements are audited by leading international audit firms. In addition, Temasek's financial performance is analysed by bond rating agencies, which have given it a AAA credit rating.

An investment loss does not constitute a draw on Past Reserves, as long as the disposal of the investment is done at fair market value.

When any bona fide investment decision is made, there is expectation of a gain. However, no large investor is able to avoid taking some losses in investments after they are made, as investments carry some element of risk.

After an investment is made, any losses arising from its sale at fair market value do not constitute a draw on Past Reserves. Similarly, mark to market losses (i.e. falls in the market value of investments that are still being held) are also not considered a draw on Past Reserves.

The Government assesses the performance of the investment entities over the long term, rather than individual investments or over the short term where their performances would be influenced by the immediate market cycle.

GIC and Temasek have fully recovered from the global financial crisis. During the financial crisis, the portfolios managed by GIC and Temasek had suffered declines in their portfolio values in line with global market declines. However, these declines came after much greater increases in their portfolio values in the preceding five years. For example, Temasek's portfolio increased by S$124 billion over the preceding five years ‒ from the time the market cycle commenced in April 2003 to March 2008.

Taking the cycle as a whole ‒ from the start of the crisis and through the recovery ‒ both GIC and Temasek have done creditably in comparison to their international peers among major global managers. They have fully recovered their declines in portfolio values occurred during the crisis. More importantly, both GIC and Temasek have earned creditable returns over longer periods.

The Government does not set specific sustainability targets or approaches for the investment entities, just as the Government does not direct their individual investment decisions.

That said, the Government expects the entities to integrate sustainability considerations into their respective investment processes. This should be done in a way that best suits their respective mandates, allows them to deliver sustainable returns over the long term, and preserves their reputation with global partners and markets. The entities are aware of the Government's sustainability goals and plans for the nation.

MAS, GIC and Temasek have disclosed their sustainability approaches publicly. These can be found in their respective publications (e.g., MAS's Sustainability Report, dedicated Sustainability chapters in the GIC Annual Report and Temasek Review).

The Government has not and does not transfer funds to Temasek or GIC to improve their performance figures.

1. As shareholder of Temasek, the Government injects capital into the company through investments in new Temasek shares, taking into account its Temasek’s risk and return profile over time. These investments in Temasek’s shares are reflected in Temasek's accounts and are made public.
2. An occasional misperception is that such capital injections can be used to improve the reported returns performance of Temasek. Capital injections can enable Temasek to increase the size of its portfolio, but do not improve investment returns⁷. Temasek's reported returns figure follows the industry practice of computing returns, which is to deduct any capital injections from (and withdrawals by) the Government in making such calculations. Temasek's returns figure is reviewed and regularly published in its annual report.
3. In the case of GIC, the allocation of Government funds to GIC for investment management also cannot improve GIC's investment performance figures.

Another occasional misperception is that the Government made the Constitutional amendments in 2002 and 2004 to allow for the transfer of Past Reserves between Fifth Schedule entities and the Government so as to be able to conceal investment losses. This is not true.

1. The amendments in 2002 and 2004 were made to enable the transfer of Past Reserves within the Reserves Protection Framework (i.e. among the Government and Fifth Schedule entities), without any loss of protection to Past Reserves. Past Reserves cannot be transferred outside of the Reserves Protection Framework without the approval of the President. The amendments in 2002 and 2004 did not alter this position.
2. Past Reserves may need to be transferred to facilitate the restructuring of Fifth Schedule entities to better deliver public services. For example, the merger of the then-Board of Commissioners of Currency, Singapore (BCCS) with Monetary Authority of Singapore (MAS) in 2002 required the transfer of BCCS' Past Reserves to MAS.
3. In transferring the Past Reserves from BCCS to MAS, there was no loss in the amount of Past Reserves protected. This was because the Board of Directors of MAS had undertaken to add the Past Reserves transferred from BCCS to the Past Reserves of MAS to be protected.
4. The Constitutional amendments make clear that there is no draw on Past Reserves as long as: (i) Past Reserves are being transferred among entities that are within the Reserves Protection Framework; and (ii) the receiving entity undertakes to protect he Past Reserves that are transferred over. In such circumstances, the overall amount of Past Reserves being protected is unchanged, and hence the President's approval need not be obtained for such transfers.
   

SM Lee Hsien Loong revealed the inner workings of Temasek and GIC in this CNA interview.

Being included in the NIR framework does not impact the investment strategies of the three entities.

The NIR framework provides a formula to work out how much the Government can spend from the reserves, based on the expected long-term real rate of return of the investment entities on the framework. By basing the Government’s spending on expected long-term real returns of the investment entities on the framework, the investment entities are not pressured to sell assets, realise capital gains, and pay more dividends. The NIR framework is designed to ensure that the investment returns are tapped for spending in a disciplined and prudent way.

The Government maintains Government Deposits with MAS as well as a variety of sources of cash flows to meet its liquidity needs for day-to-day operations. This enables the Government to manage its liquidity needs independent of the cash flows from the three entities’ investment strategies. Unlike dividends, which are separately determined, the NIR framework does not require any realisation of cash that needs to be transferred from the investment entities to the Government.