SINGAPORE – The steady performance of the three Singapore entities – GIC, Temasek and the Monetary Authority of Singapore (MAS) – that manage the country’s national reserves shows they continue to maintain the capability to generate sustainable returns over the long term even when the odds are against them.
Starting with the US-China trade war that broke out in 2018, the global economy and capital markets worldwide have weathered a series of shocks, including the Covid-19 pandemic, the Russia-Ukraine war, the US’ new round of sweeping tariffs on its friends and foes alike, and the onset of the Iran war in February.
These upheavals have menaced businesses worldwide with higher operating costs and lower margins, amid sporadic supply chain disruptions and volatile pricing of energy and raw materials.
Meanwhile, economies are under relentless pressure to manage the balance between growth and inflation as the world economic order frays at the seams.
Hence, these are testing times for the guardians of Singapore’s reserves, even as their mandates, portfolio construction approaches, investment horizons and reporting frameworks are different.
GIC – the primary manager of government assets invested abroad – posted in its annual report for the financial year ended March 31, 2026, its lowest 20-year annualised returns since 2020.
However, it still managed to nearly double the inflation-adjusted purchasing power of its reserves over that period.
MAS – which maintains a globally diversified, liquid official foreign reserves (OFR) portfolio to support its functions as a central bank – recorded a net profit of $20 billion, backed by investment gains of $39.8 billion that exceeded its 10-year historical average of $18.3 billion.
MAS uses the OFR to buy and sell assets, allowing the Singapore dollar to maintain an appropriate value against other currencies. This is a monetary policy imperative because, unlike most central banks which target interest rates, MAS uses the exchange rate to manage inflation.
MAS said it will contribute $1 billion to the Government’s Consolidated Fund, and return a further $2.5 billion of its net profit to the national financial account, where all public revenues are deposited.
Temasek – the active, value-oriented equity investor wholly owned by the Government – reported its net portfolio value hitting a record $518 billion, up by $49 billion in the last year, amid a strong performance from its Singapore-based portfolio companies.
The investment company, which holds a mix of foreign and local assets, delivered a one-year total shareholder return of 10.5 per cent and a 20-year total return of 6.8 per cent.
Fuelling the national economy
The overall performance and risks to the portfolio of assets invested by the three entities are meaningful for Singapore’s economy and citizens in more ways than one.
They not only preserve and grow reserves that can be used in times of economic stress and crisis, but also provide a stream of income to help finance part of the annual government budget.
Up to 50 per cent of the expected returns from the three entities flow directly back into Singapore’s annual national budget via the Net Investment Returns Contribution (NIRC).
Their steady performance allows the NIRC to consistently remain the single-largest source of government revenue, directly funding public infrastructure, healthcare subsidies and education without relying solely on taxation.
Hence, their views on the global economy and their strategies to fulfil their mandates while mitigating risks matter.
The unprecedented convergence of geopolitical tensions, protectionism, technological competition and transformation, and energy security concerns – exacerbated by the Middle East conflict – may keep inflation sticky and interest rates higher.
MAS also warned that uncertainty over sustaining the AI investment boom – which has been an important plank of global and domestic growth – can become a key economic and markets risk.
MAS managing director Chia Der Jiun said global growth, investment and financial market performance have become highly dependent on projections of large and increasing investment in data centres and semiconductor chips continuing well into the future.
He added that besides financial stability risks, a significant pullback in AI investments is likely to sharply weaken economic expansion around the world – especially in Asia, where AI-driven electronics exports account for more than 70 per cent of the region’s export growth year to date, up from 46 per cent in 2024.
However, the investment boom and the global economy in general remain resilient despite repeated shocks, from higher US tariffs to the Iran war, he noted.
Looking ahead, he said, growth of the Singapore economy should stay firm for the rest of 2026, with global AI-related demand likely to continue providing a meaningful boost.
Both GIC and Temasek remain committed to their investment strategies to harness the growth potential of a broad spectrum of AI-related firms.
GIC said it will broaden its focus across the AI value chain from “enablers” of artificial intelligence – creating the foundational infrastructure for the technology – to monetisers building AI-powered products and platforms, as well as companies that have adopted AI to transform their operations and growth prospects.
Temasek had a similar view on AI, with chief executive Dilhan Pillay saying that promising companies across technology’s value chain will remain a key focus area, along with core-plus infrastructure and private credit.
He said Temasek has set targets to grow its portfolio exposure to these three areas by March 2031. AI-focused investments will grow by up to 15 per cent, and 5 per cent each for core-plus infrastructure and private credit.
However, Temasek will remain selective and disciplined about risks, especially pertaining to the AI segment, he noted.
