Singapore’s GIC: Assess Thyself!

Ashby Monk

Back in 2008, Ted Truman — in his now famous SWF Scoreboard — awarded the Government of Singapore Investment Corporation (GIC) 41 points out of a possible 100. The GIC’s dismal performance in the ranking was weighed down by, in Truman’s opinion, poor governance, accountability, transparency and behavior. In comparison, Alaska’s PF, California’s PERS, Canada’s CPPib, New Zealand’s SF, Norway’s NBIM, and Wyoming’s PMTF all had scores above 90. So yeah, 41 was a pretty bad score (…and, let’s be honest, a tad too severe given the governance failures we’ve seen coming out of high-scoring CalPERS…). Anyway, by 2011, the GIC had improved a lot, but its score was still only 65 on Truman’s ranking. Once again, the fund was falling well short of its peers. Clearly, the Singaporean SWF was failing to live up to its obligations as a signatory of the Santiago Principles, right? Not so apparently.

Just this morning the GIC released a detailed assessment of its compliance with the Santiago Principles, and, I must admit, the GIC’s assessment of the GIC’s performance is very impressive. The assessment shows how the fund lines up with the principles and practices line-by-line. And, even with my “BS rader” on, the GIC still comes off looking rather good. Granted, you have to take the GIC at their word in a few places (which I do), but the fund seems to be meeting the ‘letter of the law’ in GAPP.

Now, I’m not saying they’re meeting the ‘spirit of the law’ in all places, but the actual ingredients do seem to be there. For example, GAPP#11 asks that:

“An annual report and accompanying financial statements on the SWF’s operations and performance should be prepared in a timely fashion and in accordance with recognized international or national accounting standards in a consistent manner.”

“Aaaahah!”, you say, “We got ’em! There are NO detailed financial statements in the publicly released annual report.” That may be true, but have a look at #11 again. It doesn’t say anything about public disclosure of these documents. And, as the GIC notes, it does provide monthly, quarterly and annual reports to the Accountant-General and the Ministry of Finance, with details ranging from the fund’s holdings and bank accounts to its risk analytics and performance. So, while it may not quite meet the “spirit” of GAPP#11 (i.e., putting out a financial statement with its public annual report), the SWF does seem to fulfill its obligations.

Let’s try this “gotcha game” again with GAPP#17, which asks that:

“Relevant financial information regarding the SWF should be publicly disclosed to demonstrate its economic and financial orientation, so as to contribute to stability in international financial markets and enhance trust in recipient countries.”

At first blush, the GIC would seem to fail GAPP#17 as well. But, look again. How do you define “relevant” information ? And who determines what is and isn’t relevant? It doesn’t say. Here’s the GIC’s response:

“The GIC annual report is published via the website, to give the international community a better appreciation of the context and circumstances in which GIC operates, and to assure that GIC invests only to achieve financial returns sustainably. GIC discloses relevant information to demonstrate its economic and financial orientation.   The GIC annual report describes GIC’s investment objectives, legal and corporate governance framework, investment approach, as well as risk management framework. GIC has taken further steps in the direction of increased transparency over the years.  Beginning with this year, GIC publishes the nominal returns  and annualized volatility of these returns over 5-year, 10-year and 20-year horizons, in addition to the 20-year real return disclosed since 2008.”

That sounds to me as though the fund is in fact meeting its obligations under GAPP#17. And, if you’re a nerd like me and you tend to go back and look at source documents, you’ll see that the GAPP#17’s detailed explanations make the GIC look even better:

“The financial information referred to in this principle would normally be asset allocation, benchmarks where relevant, and rates of return over appropriate historical periods consistent with investment horizons.”

That’s basically what the GIC is doing. So it’s compliant. Anyway, I think you’re getting the point: the GIC seems to be meeting its obligations as a GAPP signatory.

Now, we can definitely challenge the way the fund is interpreting the GAPP — and no doubt Sven Behrendt will do so, as he recently indicated that the GIC was only 60% compliant with the GAPP. I’m guessing that it’s a matter of “spirit” of law versus “letter” of law.

And we also need to square the performance above with the 65 the GIC just received on Truman’s Scoreboard. In this case, it’s easier to figure out; the Truman Scoreboard is simply more strict.

Finally, there’s the meatier question of whether the GAPP are just too watered down. But that’s for another day.

Whatever the case, the fact is that the GIC has now released a detailed report of its operations, which underscores an ongoing commitment to do a bit more talking with the public about its operations. Credit where credit is due.

2 Responses to “Singapore’s GIC: Assess Thyself!”


  1. 1 Sven Behrendt August 10, 2011 at 4:42 am

    A great step forward for the Principles, one should say, let’s hope that this trend continues!

    But since you get into the interpretation thing, Ashby, here is one comment (amongst others that come to mind). In my ranking, I deliberately interpret the Principles in a way that sets the bar high, and accordingly requires SWFs to disclose more information than a conservative interpretation would ask them to – knowing fully well that in the end there is not one single “true reflection” of SWFs, or of the Principles for that matter, though some claim otherwise.

    As this is the case, there definitely needs to be space, or space be made for a more succinct conversation about the shared interpretation of the Principles. It is an intriguing side observation that in this fragmented 21st century global communication society no single institution has sovereign interpretive powers (or so we say in my mother tongue) or the ability to monopolise the discourse. SWFs made that experience in 2008.

    Additional point being that one of the challenges the Principles face is that they have been drafted by SWFs, implemented by SWFs, and implementation judged upon by SWFs themselves; in other words, the core constituents of the Principles have assumed regulatory, executive, and judiciary functions in one body – and that might not necessarily resonate satisfactorily across recipients.

    But I am getting off track: my reading of GAPP #11 (which is the original point I wanted to make) is that it is embedded in the wider narrative of section B. “Institutional Framework and Governance Structure”, which covers GAPP #6 all the way up to GAPP #17. GAPP #16 as part of section B. states that “The governance framework and objectives […] should be publicly disclosed.” I do interpret “governance framework” to refer to section B. in its entirety, and as such GAPP #11 is linked to the request made in GAPP #16. N’est-ce pas?

    Regarding GAPP #17, the question about “relevant”. In the end the “relevance” of disclosed financial information is not decided by GIC, the Government of Singapore, the IFSWF, or you and me, but by the recipient that needs to be at ease with the economic orientation of the fund. It is the recipient who decides if the financial information that GIC, or any other fund, provides is relevant enough to dispel concerns and allow unrestricted access to the markets within her jurisdiction (though in this day and age, realistically, that barrier might be fairly low). GIC, as it stands, balances its interests between transparency and strategic opacity in a way that works best for it. But I fear that the signatories of the Principles do not have the monopoly of interpretation about what constitutes “relevant” information.

    Now, to the “watered down point”, Ashby……. ahh, no sorry, that will get longer than I thought. Keep it for next time, as you suggest, Ashby.

  2. 2 Ashby Monk August 10, 2011 at 2:00 pm

    Thanks so much for the thoughtful comment, Sven. Your thoughts are much appreciated. Cheers, A


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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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