Why doesn't the U.S. have a National Sovereign Wealth Fund (GIC) ?

It's a New Year again, and an old question bugs me: Why is it that the United States doesn't have a modern National Sovereign Fund with a corporate mandate, as some 100 countries do, from good old Russia (RDIF) to newly established (Italy -est. 2011, Georgia -est. 2013 ). SWF Institute map: http://www.swfinstitute.org/sovereignwealthmap.html

The Social Security Fund invests only in Treasury Notes/Bonds yielding an incredibly poor return. Meanwhile a country with a population of 5.3 MM (2013) such as Singapore has a $285 Bn AUM megafund averaging 17% annual returns historically.

"Temasek was established to create and maximize long-term shareholder value as an active investor and shareholder of successful enterprises. As Singapore's economy evolved and became increasingly globalized, Temasek began to invest actively outside of Singapore. Temasek has been assigned an overall corporate credit rating of "Aaa" by Moody's and "AAA" by Standard & Poor's. From an initial portfolio of S$350 million in 1974 made up of various Singapore start-ups, Temasek's investment exposure has grown over the last 30 years into a globally diversified portfolio. Temasek is an active value-oriented shareholder and investor, which seeks to manage its investments to create and maximize shareholder value. Temasek is an active shareholder and aims to achieve sustainable returns by engaging the boards and management of its portfolio companies."

(Quote from: http://www.temasekreview.com.sg/#download,
http://www.temasekreport.com/documents/full_annual..., http://www.Temasek.com.sg/portfolio/portfolio_high..., Investment Strategy of the Temasek Holding by Joseph Komornik et. al.)

Comments (16)

Jan 2, 2014

Because America is run by people whose thinking is rooted in how things used to work. We're waiting for a generation to die off, there are congressmen that don't know how to write an email [doing a poor job of] making internet law. It's that, or start defeating them in the polls.

Hell, I'm in. Sign me up. Let's start a fund and pressur the prezzie

Jan 2, 2014

Not sure if the GIC in the title was referring to Government of Singapore Investment Corporation, but GIC and Temasek are 2 different entities with different mandates. As for your question, I would think that the people in the US wouldnt be too happy if the government wanted to create a SWF or i could be wrong

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Jan 2, 2014
funwithgamma1:

I would think that the people in the US wouldnt understand jack shit if the government wanted to create a SWF

Fixed that for you

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Jan 3, 2014

GIC in title referred more to a generic Government Investment Corp. or Entity. As you can see I looked at Temasek's mandate, not GIC's.

To UFOinsider, we can't just create a Fund like that, it would have to be mandated into law by Congress.

Jan 3, 2014
BatMasterson:

To UFOinsider, we can't just create a Fund like that, it would have to be mandated into law by Congress.

Let's be honest with ourselves: Congress largely does what the president tells them to at this point in our history. Congress can object, but the president really does kind of set the tone for things. I mean, if a democratic president proposed this idea to the public and called for Congress to back it....is the GOP really object to the gov't hiring PMs to introduce more capitalism into gov't?

"My job is making Uncle Sam's money work harder for America"

^ see how easy that was to sell? :)

Jan 3, 2014

I don't understand the point of a SWF. Is it just a large government run fund that invests in publicly traded assets?
Are employees of the fund paid like government employees?

Jan 3, 2014

There is no difference in investment strategies per-se /each set by its mandate, but a commodity-focused one (like in the Arab world) when oil prices are high/above-target money flows into the Fund from state coffers, while when the oil prices are low there's no excess cash to pour into the Fund. Also, commodity Funds will invest in sectors outside energy -the need for diversification of their economies.

Jan 3, 2014

cant speak about other SWFs', but in the case of Singapore, they were set up to manage the reserves and also to invest on behalf of the pension fund (CPF). As BateMasterson mentioned Temasek has done a great job and GIC's returns have been pretty good as well. Both funds invest in equities, REPE, alternatives and so forth according to country and sector weightage

Jan 3, 2014

FYI, I am familiar with RDIF, the Russian Fund. It got started in 2011 under direct orders from the President, and it matches dollar for dollar investments from private investors, like the largest private equity funds. Has no hurdle rate. Great concept.

Jan 4, 2014

Wouldn't be a bad idea to have an SWF if America is so massively in debt? Singapore has a consistent and significant budget surplus. I'm sure people will be pissed if we're shutting the government because we don't have money to run it but we're siphoning off multiple hundred billion to invest in the markets.

Jan 7, 2014
therapist1:

Wouldn't be a bad idea to have an SWF if America is so massively in debt? Singapore has a consistent and significant budget surplus. I'm sure people will be pissed if we're shutting the government because we don't have money to run it but we're siphoning off multiple hundred billion to invest in the markets.

Yeah lets stick to shutting down the government over siphoning off billions into Obamacare

Jan 8, 2014

Hah, knowing America, the sovereign wealth fund will start buying American debt and need to be bailed out at some point?

Best Response
Jan 11, 2014

The President tells Congress what to do? Did I hear that correctly? Someone needs to email Obama and let him know that is how it goes because it sure as fuck doesn't look like it is working that way.

And the US government already makes investments in private industries. I want less, not more of that.

Jan 13, 2014

Pres sets overall policy direction, and this has been the case for most of the last century. Like it or hate the decisions/agenda, that's how it is. Both Bush and Obama accomplished most of their major policy measures against heavy congressional resistance.

@OkComputer - maybe but given the crackdown on finance, there are few presidents who could really say "I'm working to clean the crooks out of finance and open up the opportunity to make the market work for you". I can't see how the gov't would pay PMs really well like private industry, but there are plenty of successful players that go into gov't roles for reasons other than money....so cutting pay from 2+20 to, say, 5% of take might attract a certain type of person. Given the low risk tolerance and massive size of the accounts, that might be enough for a lot of people, plus the high profile exposure would be a draw. It's one of the areas where technology fuled direct democracy actually stands a chance because every part of the decision making process can be made transparent. That breeds trust. Put up a list of PMs to vote for, give them a fixed term, and then they go back up for reappointment.

Even better: let peope choose their own subaccounts, or at least part of them. Half goes in a highly conservative fund, the rest people can play around with. The details could be worked out if the will exists. I agree completely that a market based system would be surperior to the primitive transfer payment system we currently have, it's just a matter of doing it right. When the GOP made a big issue out of this last decade, Americans uniformly shared the perceptions that 1) the GOP was trying to kill Social Security and 2) they were trying to make a buck doing so, all on the heels of multiple, massive financial scandals and then a bubble encouraged by Bush's "ownership society" agenda that caused a massive real estate bubble.

With the current regimen, they are percieved as being more friendly to the interests of the average person, or at least not as hostile. If Christie is elected, he too is seen as relatively trustworthy and could propose the idea and get support for it. Bridgegate aside, and really, that's some corny and pathetic crap, he's actually pretty clean compared to 99% of NJ politicians and is seen as mostly honest. Even a 1% return on a wealth fund would be a HUGE amount of money.

Jan 13, 2014
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