The Mess that is Singapore:Part IV How big is the GIC

Balding's World

Since I began writing about different aspects about how unreliable Singaporean, Temasek, and GIC data is, I have received many questions about how reliable my data and calculations are in claiming what I am claiming. As virtually all of my data comes from the Singaporean Ministry of Finance, either directly or by way of the IMF, most critics instead quickly realized that was a futile battle and instead chose to focus on the argument that “since GIC hasn’t released its assets under management, there is no way of knowing the truth so we should just give up.” Let’s examine this argument in greater detail or as I like to call it, the $500 billion question.

Let’s begin by saying at the beginning that GIC and the government of Singapore have never publicly commented on the value of assets under management. The only official comment made is that GIC manages “well over US$100 billion.” However, rather than passively accepting this official statement, let’s see if we can’t get closer to the truth.

In July 2011, the highly respected Monitor Group estimated GIC’s assets under management (AUM) at $220 billion USD. However, the Monitor Group borrowed their estimate (which they cited as such) from the United States government report entitled “2011 Investment Climate Statement — Singapore“. The US Department of State writes:

“GIC, Singapore’s largest SWF with an estimated $220 billion in assets, does not invest domestically. GIC manages Singapore’s international investments, which are generally passive (non-controlling) investments in publicly-traded entities. Its investment is entirely overseas, with the United States as its top destination, accounting for 36 percent of GIC’s portfolio as of March 2010.”

In other words, the United States government estimates that GIC holds $220 billion USD AUM as of March 2011. This is also in the broad range of other GIC estimates which have gone as high as $300 billion USD.

I want to address one issue about how estimates are made about what GIC or other sovereign wealth funds who protect their AUM values. Most developed capital markets have strict disclosure requirements and excellent data collection services that allow for high quality estimates of who owns what. This allows much better estimates of what sovereign wealth funds hold than is generally believed. For instance, in the United States any entity that acquires more than 5% of a public companies equity is required to publicly disclose its holding. This requirement also holds for those holding the stake on behalf of others and they must list the true owner. Furthermore, given the amount of data available for companies, their holding companies, and who owns smaller levels of assets, it is possible to arrive at a much closer estimate for the AUM of GIC than believed.

Now however, lets consider the other side. If the US government estimates GIC to hold about $220 billion USD or $280 billion SGD, how big a difference is that to how big GIC should be? Well, as I have previously noted, if we just assume that the combined surpluses and increases in borrowing of the Singaporean government earned the 7% claimed by GIC, then Singapore should control at the end of 2011 about $1.1 trillion SGD.

If we accept Temasek statements of AUM of $193 billion SGD and begin with the US governments estimate for GIC of $280 billion SGD, this would give us $473 billion SGD AUM or less than half of what Singapore should have in these two entities.

Let’s begin by trying to put the size of the difference between the estimate and what GIC should be in perspective. If GIC was big enough to make Singaporean holdings approach our $1.1 trillion SGD target, that would mean it has more than $900 billion SGD of assets under management. Put another way, to match the size it should be, GIC needs to have three times as many assets under management as its current estimates. Not 3% bigger, not 30% bigger, but 300% bigger than the current estimates.

Because a number like $900 billion SGD is almost to abstract to comprehend, let me provide a small list of comparisons to help. The $900 billion SGD GIC should have in AUM is roughly equal to:

1.The combined wealth of the worlds top 25 billionaires according to Forbes.

2.$170,000 SGD for every man, woman, and child in Singapore.

3.The worlds 38th largest financial institution ahead of such well known banks banks as Standard Chartered.

4.Three times Singaporean GDP.

5.Three times the amount of assets of DBS Bank.

6.The worlds largest sovereign wealth fund and 26% bigger than the next biggest the Norwegian Government Pension Fund and twice the size of Gulf Funds like the Abu Dhabi Investment Authority.

While we do not have a complete list of what the GIC holds, ask yourself which scenario seems more likely(or which you prefer): the GIC has secretly become the largest sovereign wealth fund in the world and one of the largest financial institutions in the world without leaving a noticeable footprint in global markets of its size or that GIC is not as big as it needs to be to make the numbers of Singaporean surpluses and debt reconcile? In the latter scenario, where are the missing assets if GIC is not managing them?

One last point, if GIC really is as big as it should be, does it benefit the Singaporean people to have no public disclosure or oversight over their $1.1 trillion SGD in public assets? These assets belong to the people and managers should be accountable to the people for managing their money. No investor turns over money to a wealth manager without demanding accountability, transparency, and regular reports. Unfortunately, everyone knows what happens when basic rules for money management are not followed.