Is there something wrong with our Reserves?

From time to time, there are claims that the Singapore Government is covering up losses in our reserves, or that Singaporean CPF monies are not safe... 

MAS mock

From time to time, there are claims that the Singapore Government is covering up losses in our reserves, or that Singaporean CPF monies are not safe. Some recent online postings have even claimed that GIC and/or Temasek are reporting false returns to cover up losses, or that the Government siphons monies from its Budget or from Government borrowings so as to pad up GIC and Temasek’s books. 

The Government does not publish the size of assets managed by GIC, although the asset size of MAS and Temasek are published. On the basis of the information that the Government has published, as well as the full system of checks and balances, these recent claims are baseless. Indeed, they are fantastical, but let’s look at some basic facts.

For more information, watch this


1. Which entities manage the nation’s reserves? 

Our reserves are managed by three agencies – the Government of Singapore Investment Corporation (GIC), Temasek Holdings (Temasek) and the Monetary Authority of Singapore (MAS). The Government’s assets, other than its deposits with MAS and its stake in Temasek, are mainly managed by the GIC. The MAS which is a statutory board, manages its own assets. Temasek, which is wholly owned by the Government, also manages its own assets.

1) The Monetary Authority of Singapore (MAS) – As at 31 Mar 2012, the Official Foreign Reserves (OFR) managed by MAS stands at S$305 billion.  MAS’s management of the OFR is in line with Singapore’s monetary policy, which is centred on the management of the exchange rate. The primary objective of our monetary policy is to promote medium term price stability for sustainable economic growth.  MAS, as the central bank, also holds around S$150 billion in government deposits as at 31 Mar 2012.  

2) Temasek Holdings – Temasek was incorporated in 1974 as an independently managed commercial investment company. As at 31 Mar 2012, Temasek’s assets under management (AUM) are S$198 billion.  

3) Government of Singapore Investment Corporation (GIC) – GIC is the Singapore Government’s fund manager and manages over US$100 billion. So far, the Government has not revealed the full size of the assets managed by GIC (this is discussed in item 3).    

For more information on our reserves, watch this video.

2. How have MAS, Temasek and GIC performed?    
MAS, Temasek and GIC publish annual reports on their performance.  


The MAS Annual Report provides its financial statements, including its balance sheet and statement of profits and losses. 

MAS’ balance sheet shows their total assets and liabilities – you can see how its assets have grown over the years. MAS’ Official Foreign Reserves (OFR) as of 31 Mar 2012 is valued at S$305 billion. For more information, please refer to the annual report for 2011/12, which can be found here: []


Temasek publishes an annual report that discloses its portfolio value as well as its performance returns over different time periods.

Temasek’s net portfolio value ending 31 Mar 2012 was S$198b. It started with a portfolio of assets valued at S$354 million in 1974. It reports Total Shareholder Return  (TSR) over 1, 2, 3, 5, 10, 20, and 30 year periods and since inception 38 years ago. For example, its TSR over the last ten years was 10% per annum. It has delivered a TSR of 17% per annum since inception. 
Temasek’s portfolio performance has reflected two distinct phases of investments:

Pre-2002 investments

o These included the Government–owned companies that had been transferred to Temasek.
o This pre-2002 portfolio of Temasek companies benefited from, as well as contributed to, Singapore’s economic transformation and growth in the earlier years. 
o The transfer of Government companies such as SingTel to Temasek ‒ and the subsequent listing of these assets ‒ also contributed to Temasek’s total shareholder returns by market value.
However, from 2002 onwards, the performance of this portfolio of earlier Temasek assets is free from the “boost” afforded by such listings. They continued to perform well relative to the markets, showing annualised returns of 11% in SGD terms from 31 March 2002 to 31 Mar 2012. Over the same period, the MSCI Singapore Index showed annualised total returns of 7.8% in SGD terms, assuming dividend reinvestment in the index.

Post-2002 investments

o Since 2002, Temasek became an active investor in Asia and other markets as part of its strategy to reshape its portfolio for the longer term. 
o Its diversified investments in external markets since 2002 have provided a significant boost to Temasek’s long-term returns. This portfolio of post-2002 Temasek investments has delivered an annualised return of 18% in SGD terms over the 10-year period from 31 Mar 2002 to 31 Mar 2012.


GIC publishes an annual report on the performance of the Government’s portfolio. GIC reports its 5-year, 10-year and 20-year annualised nominal rates of return, and its rolling 20-year real rate of return in its annual report . 
The 20-year rate of return reflects the Government’s investment mandate for GIC, which emphasizes that it should invest the portfolio with a long term orientation.  The 5- and 10-year timeframes give an intermediate measure of GIC’s longer term performance, and a sense of the ongoing performance of the portfolio.

For more information, please refer to the GIC annual report for 2011/12.


3. Why do we not reveal GIC’s assets?  
Unlike MAS and Temasek which publish the value of their assets, the Government does not publish the size of its assets managed by GIC. Revealing GIC’s assets too will amount to publishing the full size of Singapore’s financial reserves.

It is not in our national interest to publish the full size of our reserves. If we do so, it will make it easier for markets to mount speculative attacks on the Singapore dollar during periods of vulnerability. Moreover, our reserves are a strategic asset, and a key defence in times of crisis, and it will be unwise to reveal the full and exact resources at our disposal. 

However this does not mean that GIC is unaccountable, or that there are no checks in place. (See item 4.) 


4. What oversight and checks over our investment entities are in place?
There is a proper system of safeguards that ensures careful oversight of each of the entities managing our nation’s reserves. There can be no false declaration of returns or of portfolio values.

First, the appointments to the Board of Directors that oversee each of these investment entities are subject to the concurrence of both the President and Government. Before the President decides on whether to concur, he obtains advice from the Council of Presidential Advisers (CPA), which in turn scrutinises the appointment. The President has discretion to decide whether or not to concur with the appointments after consulting the CPA. 

Second, each entity’s financial statements are independently audited. The MAS and GIC’s financial statements are audited by the Auditor-General, who is an independent organ of state under the Constitution. Temasek’s financial statements and those of its subsidiary companies are audited by leading international audit firms.

Third, it is the duty, under the Constitution, for the Auditor-General, Accountant-General, the Board of directors of the Fifth Schedule entities , and their CEOs to inform the President of any proposed transaction that is likely to draw on Past Reserves. 

Fourth, the President and the CPA have full access to any information they require from these investment agencies to fulfil their responsibility of safeguarding the reserves. If they suspect any wrongdoings, they can request for further information from the Board of Directors or management of the investment entities. 

Allegations of fraudulent reporting by our investment entities are not just baseless but bizarre. It amounts to saying that everyone within the system of safeguards – the President, the members of the CPA, the Cabinet, Auditor-General, Accountant-General, leading international audit firms, members of the boards of the investment entities, and the numerous officers preparing the reports – is collaborating to defraud the public. 


5. Temasek has reported a 17% average annualised Total Shareholder Return (TSR) since inception. This significantly outperforms the local and foreign stock market indices.  Is that even possible?
The factors accounting for Temasek’s 17% average annualised TSR since inception are discussed in item 2. 

Temasek’s TSR cannot be influenced by capital infusions from Government. The TSR accounts for the appreciation of the value of assets, including dividends paid to the shareholder and excluding capital injections.

As with several private equity firms and other long-term investors, Temasek’s returns do not merely follow the overall performance of local or foreign stock market indices. Long-term investors make changes in their asset allocation strategy over time to take advantage of investment opportunities. 

Furthermore, like other value-oriented investors, Temasek takes concentrated position in a selected portfolio of companies that it considers to be able to deliver value. In addition, unlike the stock market indices which comprise listed equities, Temasek’s portfolio includes unlisted investments. This is similar to that of private equity firms, which make returns from IPOs, mergers and cash distributions to shareholders from their portfolio of companies.  It is not uncommon for good private equity firms to deliver returns that have significantly outperformed the market indices over the long run. 


6. Some online postings attempt to estimate the size of GIC by using data on budget surpluses and issuance of Government securities to estimate fund flows into GIC over the years. When their estimate of GIC’s size exceeds other market estimates, they conclude that funds have therefore gone missing. Where do they go wrong? 

Our reserves cannot ‘go missing’ (see item 4). 

Some of the confusion created by these recent “estimates” of GIC’s assets arises from the following errors:

First, they assume that all the Government’s available funds are flowed to GIC alone. The Government has significant deposits placed in MAS. As of 31 March 2012, the Government has $147 billion deposited with MAS, compared to MAS’ Official Foreign Reserves (OFR) valued at S$305 billion. MAS has a significant proportion of its portfolio invested in liquid financial market instruments and hence earns a lower rate of return than GIC. 

Second, debt servicing costs are sometimes ignored in these estimates. This results in an over-estimate of the assets accumulated through investing the proceeds from the issuance of Government securities, especially over long periods of time. For more information on the Government’s debt position, please refer to the MOF website.

Third, they overestimate the funds flow into GIC by including the interest and dividend income that the Government gets on its investments. These estimates incorrectly assume the full amount of government budget surpluses as fresh fund injections, without first removing the interest and dividend income portion.


7. Why does Singapore have a high debt-to-GDP ratio despite running budget surpluses in the past? Do the debts mean that our CPF monies are not safe?

Singapore has no net debt. Its large gross debt position is due to the issuance of government securities. However, the Government’s assets substantially exceed these debts. 

This can be seen from the fact that the Government has significant net investment returns that can be spent on the Budget each year. Under the Constitution, the Government is able to spend from the Net Investment Returns only if it enjoys a positive net asset position. In other words, if the Government’s assets fall short of its liabilities, there can be no contribution from the investment returns on reserves in the Government Budget. 

After deducting all the Government’s liabilities (including CPF monies), the remaining net assets produce significant returns. The Net Investment Returns Contribution (NIRC) is about $7 billion; it should be further noted that the NIRC only comprises up to 50% of the returns earned on the reserves. 

The Government’s strong net asset position also illustrates why CPF monies are safe. To underscore this, the Government fully guarantees the bonds that CPF monies are invested in. 


8. Why does Singapore need to issue so much debt anyway? 

Singapore has a unique system.  We do not borrow to fund the Government Budget, as the Constitution as well as the Government Securities Act prevents us from doing so. Furthermore, the Government is required to run a balanced budget over every term of government, which is about 4 to 5 years. Government debt issuances are therefore invested and not spent on the Budget.

The two types of Government debt securities are issued for reasons unrelated to the Government’s fiscal needs: 

a) Singapore Government Securities (SGS) are marketable debt instruments issued for purposes of developing Singapore's debt markets. The principal objectives of SGS issuance are to: i) build a liquid SGS market to provide a risk-free benchmark against which other private debt securities are priced off; ii) foster the growth of an active secondary market both for cash transactions and derivatives, to enable efficient risk management; and iii) encourage issuers and investors, both domestic and international, to participate in the Singapore bond market. As at December 2011, SGS stock is valued at S$79 billion, while the stock of Treasury-Bills is valued at S$59 billion.

b) Special Singapore Government Securities (SSGS) are non-tradable bonds issued specifically to the Central Provident Fund (CPF) Board, Singapore’s national pension fund. Singaporeans’ CPF monies are invested in these special securities which are fully guaranteed by the Government. The securities earn for the CPF Board a coupon rate that is pegged to CPF interest rates that members receive. As at December 2011, SSGS stock is valued at S$216 billion. 

The issuance of Government debt is solely for the above two purposes. As explained in item 5 and in Q11 on MOF’s website, the proceeds from the issuance of debt cannot be used to improve the investment performance of GIC or Temasek. 

For more information on government debt, please refer to the annual government debt report or our Factually article on CPF.


[1] Total Shareholder Return measures compounded annual returns to shareholder as if it held the Temasek portfolio directly. It accounts for the appreciation of the value of assets, includes dividends to shareholder and excludes capital injections from shareholder.

[2] In its annual report for 2011/2012, GIC reported 5, 10 and 20-year annualised nominal returns in USD terms of 3.4%, 7.6% and 6.8% respectively. It also reported a 20-year real rate of return of 3.9%. GIC also publishes the performance data of two composite portfolios to put its investment returns into perspective. These portfolios comprise of 60% global equities and 40% global bonds, and 70% global equities and 30% global bonds. For the 5- and 10-year periods, GIC reported higher returns with lower risk than both composite portfolios. For the 20-year period, GIC had lower returns and lower risk. This was because its portfolio was more conservatively invested with more cash and bonds in the first decade of the 20-year period.

[3] Fifth Schedule entities refer to key statutory boards and Government companies that are listed in the Fifth Schedule under the Constitution. Examples of Fifth Schedule entities are CPF Board, MAS, HDB, GIC and Temasek. The reserves of these entities are protected under the Reserves protection framework.

This article is accurate as of Oct 2012.

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Unless otherwise indicated, the articles here are generally accurate as of their publication dates. Please visit the relevant Goverment agency website for the latest updates.