How Singapore Manages Its Reserves

Singapore’s reserves serve three objectives—as a buffer against crisis, as an endowment to finance current needs, and to maintain confidence in Singapore’s exchange rate-centered monetary policy. The reserves are managed in three pots—the Monetary Authority of Singapore (MAS), as the central bank, manages the official foreign reserves (OFR) and invests them mainly in safe and liquid assets; the GIC, a fund manager to the government, manages a diversified portfolio with a higher risk profile to achieve sustainable long-term returns; Temasek, an investment company wholly owned by the government, is an active equity investor which seeks to deliver long-term shareholder value. MAS’ approach to managing the OFR encompasses robust risk management, balanced asset allocation, and an efficient investment process. Risk management involves the setting of liquidity and risk tolerance levels, and employing stress tests to assess the risks to the portfolio. To achieve a balanced asset allocation, the OFR is diversified across geographic regions, asset classes, and currencies. The investment process includes judicious benchmark selection and customization, and tapping into specialized external investment expertise.