2018 / 19 Report on the Management of the Government’S Portfolio OVERVIEW Who We Are 2018/19 Highlights
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2018 / 19 Report on the Management of the Government’s Portfolio OVERVIEW Who We Are 2018/19 Highlights GIC’s mission is to secure Singapore’s financial future. Performance We invest for the long term to preserve and enhance the international purchasing power of the reserves • GIC achieved a 20-year annualised rate of return of 3.4% above global inflation placed under our management. Our work contributes for the financial year ended 31 March 2019. to the well-being of present and future generations • We are prepared for the uncertainty ahead and aim to deliver sustained long-term of Singaporeans. Long-term orientation and value returns on the reserves under our management, for the benefit of Singapore. discipline are at the heart of our investment philosophy. We manage a robust and diversified portfolio to generate steady real returns over a 20-year investment horizon, Appointments so as to fulfil our mission. We consider and integrate all opportunities and risks to deliver long-term value We welcome: through our investment and corporate practices. • Mr Tharman Shanmugaratnam as our Deputy Chairman on 1 May 2019. GIC employs over 1,500 people across our 10 offices • Mr Lawrence Wong, who was appointed to the GIC Board on 1 November 2018. worldwide. We are committed to engaging and growing our people. As an institution and as individuals, we are • Mr Seck Wai Kwong, who was appointed to the GIC Board on 9 November 2018. guided by our common values of Prudence, Respect, Integrity, Merit and Excellence to achieve the results we • Mr Chan Chun Sing, who was appointed to the GIC Investment Strategies seek without compromising our reputation. Committee on 1 October 2018. • Mr Carsten Stendevad, who was appointed to our International Advisory Board on 1 October 2018. The year in numbers Annualised rolling Outlook 20-year real rate of return 3.4% • In view of the high valuations, slowing global growth, and significant Over uncertainties, we maintain our cautious portfolio stance. Number of employees • Our diversified portfolio, disciplined investment approach, and flexible 1,500 capabilities leave us well-placed to invest in this challenging environment. Our teams will also continue to search for compelling idiosyncratic opportunities, and stand ready to take advantage of potential dislocations. Report on the Management of the Government’s Portfolio for the Year 2018/19 2 OVERVIEW The GIC Primer Our mission is to preserve and enhance the long-term international purchasing power of the reserves placed under our management. People and talent are central to what we can do. We believe that the results we seek are best achieved through a culture founded on our five PRIME values of Prudence, Respect, Integrity, Merit and Excellence. P R I M E Prudence Respect Integrity Merit Excellence We exercise prudence and All of us are united in Everything we do is founded We recruit and develop We are relentless in our sound judgement and take a common endeavour, on integrity. We expect the our people solely on merit. pursuit of excellence. In a considered approach to regardless of who we are, highest standards of honesty We draw our talent from all that we do, we strive to managing risks as we seek where we work or what we from everyone in GIC, around the world and provide be the best that we can be. to deliver good investment do. We respect people as both in our work and in our challenging and meaningful This demands that we plan returns, always conscious individuals, care for their personal lives. This includes work. We grant recognition and anticipate well, so that of our overriding fiduciary well-being, and welcome abiding by the laws of the and reward based on we will always be in time responsibility. diversity in capability and countries we invest in, and performance and conduct for the future, fully able to background. We do not observing our code of ethics consistent with our PRIME take up the challenges and As an institution and as tolerate behaviour that works in letter and in spirit. values. We develop our people opportunities that come, individuals, we conduct against the interest of our to achieve their potential so pursuing improvements ourselves with good sense Client or of GIC. We must never jeopardise that we may also perform to where they may be found, and and circumspection, even as the trust others have in us our potential. economies where these may we take the best advantage We stress teamwork within and in our reputation for be gained. of our large asset base, and across departments, professionalism. We select business partners global presence, multi- and with our Client and based on their capability. We expect everyone to do asset approach and long- business partners. We expect We believe in long-term their best in every situation. term orientation. everyone to be free, candid relationships built upon high We harness the creativity and and constructive in their levels of performance and imagination of our people comments and suggestions, quality of service. and our business partners for and always seek to help our superior results. colleagues and GIC do better. Report on the Management of the Government’s Portfolio for the Year 2018/19 3 OVERVIEW The GIC Way The GIC Way is a set of principles that defines the way we think and act. It sharpens our focus on our Client, our commitment to our people and future. Client First People – The Key Future Now • When our Client does well, we do well • Do what’s right, not what’s easy • Tomorrow is determined today • Never compromise our PRIME values and • Help GIC make the best decisions – • Build leadership and resources for reputation; not even for better returns speak up if you have a different view the future • Always follow GIC’s investment • Attract exceptional people and develop • Insist on nimble and responsive principles: them to their full potential structures and processes ▸ Pursue intrinsic value and maintain • Embolden innovation and price discipline encourage learning ▸ Practise long-term investing • Reward what matters: contribution; not pedigree, age, gender or nationality ▸ Pick our spots: be focused and leverage our strengths • Excel in what you do; make a difference ▸ Pay attention to risk control • Empower decision-making at every level ▸ Prepare for the future • Work seamlessly across boundaries and hierarchy – OneGIC Report on the Management of the Government’s Portfolio for the Year 2018/19 4 CONTENTS 6 Overview from the 36 Feature Article: Asia’s Growing 61 Our People Chief Executive Officer Importance in the Global Economy 62 One Global Team and Financial Markets 62 High-performing Team and 10 Investment Report 37 A Growing Global Economic and Collaborative Culture Financial Footprint 11 Long-term Investment Performance 63 Developing Our People 39 Will Asia’s Rise Continue? 14 Portfolio Distribution and 64 Key Organizational Movements Intermediate Performance Markers 41 Asia Has Challenges to Overcome Before It Can Deliver Its Full Potential 64 Our Compensation Principles 17 Investing in an Uncertain and Lower Return Environment 42 How Does GIC invest in Asia? 65 Building Confident Communities 42 Conclusion 66 Our Offices 18 Managing the Portfolio 19 Our Portfolio and How We Manage It 43 Governance 20 Building the Portfolio 44 Source and Purpose of Funds 25 Investment Process 44 The President of Singapore 27 Investment Implementation 44 The Government 30 Managing Risks 47 GIC’s Governance Structure 50 Organizational Structure 51 Profiles of Board, Board Committee Members and Advisors 58 Executive Management Report on the Management of the Government’s Portfolio for the Year 2018/19 5 Overview from the Chief Executive Officer Report on the Management of the Government’s Portfolio for the Year 2018/19 Overview The Investment Environment longer-term capital expenditures, which has in and Strategy turn contributed to weak global growth. Should the policy uncertainty lead to a deeper economic While the start of the last fiscal year saw financial slowdown, major markets such as Europe and markets pricing in a “synchronised global Japan would have little policy ammunition to recovery”, we are back in an environment of respond and are therefore likely to experience a “lower for longer”. Financial markets are focused more protracted downturn. Emerging markets on the US Fed’s next move in its monetary policy, on the whole have more policy room to cushion trade tensions between major powers, and against a global slowdown, though economies growing political polarisation. We are observing with larger imbalances and vulnerabilities could high risk asset valuations that mask weak be exceptions. In short, policymakers’ scope to market fundamentals and growing economic counter an inevitable downturn is limited. With uncertainties. The investment landscape today high asset valuations and low interest rates, the continues to point to low and volatile returns in case for investor caution remains strong. the future. Beyond the current cycle, structural tensions Growth forecasts were revised sharply around rising income inequality, populism, downwards last year and markets correspondingly and job displacements by technology are likely sold off. Policymakers across major economies to remain. As policymakers around the world shifted to more accommodative policies, after grapple with these challenges, it is imperative LIM CHOW KIAT which markets once again priced in a “lower for to preserve the system of open and integrated Chief Executive Officer, GIC longer” path for future interest rates, and markets economies that has improved the lives of so many. recovered. While this policy shift is expected to Notwithstanding current trade tensions, Asia GIC’s mission is to preserve and enhance the remove the downside risk of over-tightening, its remains a constellation of dynamic, open international purchasing power of the reserves impact is expected to be limited.