GIC POISED TO BE 3RD LARGEST SWF IN THE WORLD

The Sovereign Wealth Fund Institute ranks the following as top of a lot of 100+ public funds in the world.

	Sovereign Wealth Fund	Total Assets (US$)
1st	China Investment Corp	1,350,863,000,000
2nd	Norway Govt Pension Fund Global	1,136,144,193,600
3rd	Abu Dhabi Investment Authority	790,000,000,000
4th	Kuwait Investment Authority	750,000,000,000
5th	GIC Private Limited	690,000,000,000
6th	Public Investment Fund (Saudi)	607,418,895,000
7th	HK Monetary Authority Investment	588,903,442,872
8th	Temasek Holdings	496,593,722,700

If Temasek and GIC assets are combined, Singapore has a total of US$1.187T which makes our little country as having the 2nd largest invested public funds.

We are actually the uno numero, surpassing even China. The size of GIC is a secret and the US$690B indicated here is only guesswork, pulled together from investment transactions tracked. The fact that it is such a rounded figure, as for Abu Dhabi and Kuwait too, indicates they are estimates.  The actual GIC total asset is definitely far in excess of the estimated US$690B. As at Mar 2022 the longer term government securities which contributed the funds to GIC,were US571 (S$743B @ 1.3). There are 3 other GIC capitalisation that are non-transparent - budget surpluses, land sales proceeds and forex reserves transferred from MAS. Taken altogether Singapore is actually way ahead of China.,

Before Singaporeans go chest-thumping thinking SWF investments are national wealth, as most people are wont to do, folks need to understand there are basically 3 types of government run funds.

SWF handles 3 basic types of funds --
(1) a certain portion of their revenue from extractive industries of natural resources, such as oil, set aside as the shares belonging to future generation, These funds truly belong to the public.
(2) the forex reserves of central banks which are invested by a separate SWF entity to divest the profit seeking objective from the regulatory. The funds support the debt carried in the books of central banks.
(3) the national pension funds. The funds belong to the pension contributors

In the above list, Norway, Abu Dhabi, Kuwait and Saudi Arabia belong to (1). China Investment Corp and HK Monetary Investment Authority are type (2). Philippines is in the process of setting up a type (3) called Maharlika Fund.

Just in case you get the idea of Singapore exceptionalism in managing forex reserves, there are hundreds of type (2) SWFs. Many handle both type (2) and (3) funds.

Singapore is unique. It has 4 special sources of funds no other country has -
(a) the national reserves - originally came from govt equity holdings in various commercial entities later transferred to the SWF.
(b) budget surplus
(c) proceeds from land sales
(d) debt - govt securities issued for non-fiscal purposes (such as pension funds)

Type (b) and (c) are cashflow-identified, but they form part of govt equity, ie reserves. Pension fund is included in (d) as they are invested in a special govt guaranteed bonds. Types (a) (b) (c) are funds that belong to the public. Type (d) belongs to investors.

Temasek manages (a). GIC manages forex reserves and type (b) (c) and (d).

Baring unforeseen disasters in the crypto contagion, GIC is poised to move up 2 rungs into 3rd place next year. This chart explains why.

In the months since y/e 31 Mar 2022, national debt has increased by S$192B. The sudden uptick is due primarily to the MAS programme of transferring excess forex reserves to GIC by subscribing for new class of securities RMGS issued by the govt. This transfer programme started in Mar 2022. Of this S$192B new debt, longer termed securities (SSGS, SGS, RMGS) of S$187B (US$138B) would have been transferred to GIC by now. The MAS transfer programme does not seem to have ended. I suspect a further increase of US$20B RMGS in the next 4 months.

It looks like GIC total assets will be boosted by another US$158B and investment portfolio hitting another record year in 2023. That is, if GIC can ride out the next 4 months without getting hit by another crypto disaster.

With additional capital injection, of course we can expect GIC investment portfolio will rise spectacularly. Bearing in my what I blogged before, any idiot can increase investment portfolio with capital injection. This is not to run down GIC staffers who, of course, work hard to bring in good returns. But recall a popular pro-government blogger who boasted Singapore got richer by S$235B in 2021, confusing asset growth from capital injection as growth in wealth.

That said, capital injection and asset growth means more investments and opportunity for growth in returns. In this, we need to bear in mind that whilst GIC reaps ROI from cost free capital, the liability is carried by MAS and govt who bear the cost of funds.

I hope my various blogs help others to have a bit more understanding of our sovereign wealth funds and be critical if you wish, but at the correct issues. The mentioned blogger no longer talks of wealth growth in the portfolio increase of S$280B by GIC in 2022. Instead he put it this way:

In other words, assuming earlier estimates are correct, GIC should have accumulated S$50 billion in direct ROI, S$45 billion it likely received through CPF inflows, and S$185 billion coming from official foreign reserves (and at least partly have already been delivered). Together, it adds up to S$280 billion — nearly a third more than a year before.

That is a better way of putting it. He tried by deduction to arrived at ROI of S$50B which is really wonderful if correct. In his echo chamber of supporters, fawning comments are plentiful.

His supporters suck up everything without any critical thinking. You see, one can be forgiven in having no idea about all these figures bandied about. But certainly, a huge ROI of S$50B you can bet GIC and media will be proudly boasting about it. Don't get me wrong. It is a fantastic achievement. If it's correct. Instead, the company took to squirming about 20-year long term rate of return, and achieving an ROI above inflation rate, which is nothing to crow about. The blogger blows trumpet about a S$50B profit, and his ardent supporters cheered him on without reflecting on the credulity.

The blogger got his math wrong. I explained in my previous blog that S$183B came from increase in debt (inclusive of cash from CPF) and S$13B from land sales. That leaves a difference of S$84B, much larger than the S$50B the blogger computed. I was faced with a S$84B difference which I did not subscribe to ROI. Instead, I wrote on what this S$84B is - "I have no idea and nobody's talking".

I am getting ahead of the news. Here's hoping no crypto disasters and GIC can climb 2 steps up. If that perchance comes to pass, by all means, be happy, but Singaporeans should continue to poke and question especially in an environment where non-transparency is an issue.

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