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GIC manages pool of Govt funds, not just SSGS or CPF monies: DPM Tharman

The GIC is not managing the Special Singapore Government Securities (SSGS) or CPF monies on their own, but a combined pool of Government funds including a significant sum of unencumbered assets, the Deputy Prime Minister said in Parliament.

SINGAPORE: The GIC is not managing the Special Singapore Government Securities (SSGS) or CPF monies on their own, but a combined pool of Government funds including a significant sum of unencumbered assets, said Deputy Prime Minister and Minister for Finance Tharman Shanmugaratnam on Monday (Aug 4).

"That is why the GIC's mandate is to take calculated investment risks aimed at achieving good, long-term returns on the Government's funds, without regard to the Government's liabilities," he said. 

Speaking in Parliament, Mr Tharman added that the only way to avoid fluctuations in the value of Singapore's reserves is to avoid taking investment risk. This could include, for instance, investing all of Singapore's assets in cash-like instruments. 

"However, this would mean accepting low returns over the long-term, and indeed returns that would likely fall below the interest rates on Special Singapore Government Securities (SSGS) and even Singapore Government Securities (SGS) over the long-term," said Mr Tharman.

Mr Tharman pointed out that GIC has achieved good long-term returns to date. But as investment markets are uncertain and volatile, GIC's returns over shorter periods could be low or even negative. 

For instance, the Global Financial Crisis led to a significant reduction in GIC's annualised five-year return ending March 2013 - to just 0.5 per cent in nominal SGD terms, said Mr Tharman.

But moving just a year forward to March 2014, its five-year annualised return rebounded strongly, he adds. Mr Tharman also pointed out that the Constitution guards against actions that lead to a systematic erosion of reserves, and not the investment of reserves in order to gain long-term returns, which must involve investment risk and fluctuations in market value.

The Constitution enables the President to state and gazette his opinion if he considers that the Government has entered into liabilities that will likely draw down past reserves. But Mr Tharman said the President has not been put in a position where he has had to state such an opinion. 

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