GIC lost 41%? Accountabiliity please!

[tommyh]

Reuters article on GIC dtd July 2006. They mentioned about getting higher returns (more risks), investing in hedge funds. Fast forward 1 year to July 2007 and we can see the entity taking big stakes in banks operating in a risky env (they needed GIC money because of weak balance sheets).

I think this article reflects the changing of gears in GIC investment policy. The rest, as we know, is history.

"Asia's hedge funds space is going to be important for us, we are looking for opportunities to invest there," GIC Managing Director for Public Markets Ng Kok Song told reporters, adding that the agency has invested in about 50 hedge funds.



At present, half of GIC's portfolio consists of equity investments, while bonds account for 30 percent. The remainder is made up of private equity, hedge funds, real estate and commodities, Tan said.

The share of its investments in the United States has recently declined to 40-45 percent, while 20-25 percent of its assets were invested in Europe, 8-10 percent in Japan and the rest in emerging markets.

Reuters
July 11, 2006
SINGAPORE

By Jan Dahinten and Fayen Wong

GOVERNMENT of Singapore Investment Corp (GIC), which manages the city state's reserves, plans to put more money into high-risk assets such as hedge funds in a bid to improve returns on its portfolio of more than $100 billion.

Disclosing the state-controlled fund's performance for the first time on Tuesday, its Chairman Lee Kuan Yew said GIC had achieved an average return of 9.5 percent annually over the last 25 years in US dollar terms.

Speaking at a dinner to mark GIC's anniversary, Lee, Singapore's founding father and former prime minister, said in Singapore dollar terms the average annual rate of return was 8.2 percent. The return over global inflation was 5.3 percent a year.

GIC was founded in 1981 with assets of less than S$10 billion (US$6.4 billion) and invests in equities, fixed income, foreign exchange, commodities, money markets, alternative investments, real estate and private equity.

Economists and fund managers said GIC's return looked strong compared with other state investors, given that its conservative approach.

"We don't know what the risk composition of the portfolio is, but a 9.5 percent average annual return is pretty good. The return is about double of those seen in other central banks," said Chua Hak Bin, an economist at Citigroup.

GIC said earlier on Tuesday it plans to raise its investments in emerging markets as well as private equity and hedge funds because they had proven to be among the best-performing asset classes.

"Asia's hedge funds space is going to be important for us, we are looking for opportunities to invest there," GIC Managing Director for Public Markets Ng Kok Song told reporters, adding that the agency has invested in about 50 hedge funds.

The secretive agency, which says it aims "to achieve good long-term returns ... to preserve and enhance Singapore's reserves", rarely discloses its investments. Its financial statements and investment returns are not open to the public.

MORE OUTSOURCING

GIC handles three quarters of its portfolio internally and outsources the rest to external fund managers. Ng said it planned to outsource more of its money in emerging markets and hedge funds to fund managers.

"We will outsource when we feel that the external manager is in a position to do better than in-house management, particularly in asset classes where we have no experience," he said.

At present, half of GIC's portfolio consists of equity investments, while bonds account for 30 percent. The remainder is made up of private equity, hedge funds, real estate and commodities, Tan said.

The share of its investments in the United States has recently declined to 40-45 percent, while 20-25 percent of its assets were invested in Europe, 8-10 percent in Japan and the rest in emerging markets.

It is the first time in five years that GIC has publicly disclosed information on its portfolio but Tan defended its disclosure policy, saying it was only answerable to GIC's clients: Singapore's finance ministry and its central bank.

Lee Kuan Yew, 82, is a member of Singapore's cabinet. His oldest son, Prime Minister and Finance Minister Lee Hsien Loong, also sits on GIC's board.

GIC exists alongside the equally tight-lipped but more aggressive Singapore state investor Temasek Holdings, which is headed by the prime minister's wife, Ho Ching. Temasek has a portfolio worth S$103 billion.

 

[lockeliberal]

Dear Scroobal


Temasek and GIC both have a portion of the state reserves allocated to it. Whilst one is more transparent than the other relatively both were created by the state and have state and CPF surpluses recycled within.

As stated the current statements are conflicting leading to all sorts of conflated issues with GMS throwing everything except his kitchen sink. Firstly the 41% is directly contradictory to previous statements about them being overweight in cash, so the question remains as to how much in cash how much in equities and does that 41% refer to equities or to a total portfolio.

Secondly fundamentally I believe that GIC should invest surpluses and reserves in equities and real estate, in order to preserve value. I have stated that the government should just do a what if from the day it was started assuming a pure T BILL GILT and AAA bond holding and what would be the final value to day under management.

The question would be would you want a lesser value under "safe" management or a higher value which has suffered portfolio losses but probably even after loss is still higher than the "safe" option.


Locke

 

[Goh Meng Seng]

Dear Locke,

This figure of 41% comes from the horse mouth and as I have said, you should ask your party's MPs to seek clarifications on that.

The point is, for National wealth management, you should not be thinking of "HIGHER RETURN" as if there are cookie points to be gained for the fund managers while the risks are born by the Nation!

If you like to have higher return, you should be in hedge fund business, not SWF.

Goh Meng Seng

Dear Scroobal


Temasek and GIC both have a portion of the state reserves allocated to it. Whilst one is more transparent than the other relatively both were created by the state and have state and CPF surpluses recycled within.

As stated the current statements are conflicting leading to all sorts of conflated issues with GMS throwing everything except his kitchen sink. Firstly the 41% is directly contradictory to previous statements about them being overweight in cash, so the question remains as to how much in cash how much in equities and does that 41% refer to equities or to a total portfolio.

Secondly fundamentally I believe that GIC should invest surpluses and reserves in equities and real estate, in order to preserve value. I have stated that the government should just do a what if from the day it was started assuming a pure T BILL GILT and AAA bond holding and what would be the final value to day under management.

The question would be would you want a lesser value under "safe" management or a higher value which has suffered portfolio losses but probably even after loss is still higher than the "safe" option.


Locke

 

[lockeliberal]

Dear GMS

Some of the managers for the Havard Endowment Fund are as well paid as wall street bankers :_)). Ok but thats besides the point.

1. Is GIC like a hedge fund ? Not from the report I have read though Though the fact that it probably diversified somewhat into a hedge fund or private equity does not make it one. Does the fact that it makes bets on stocks and property make it a hedge fund, nope not from what I l know and in my view your statement is so far of the reservation it smells of politicking.

2. With regards to the SWF and the unclear and contradictory public statements lets just leave that until more information comes to light.

3. That 40% includes DBS, Barclays , Merrill, Stan Chart and CCB. Information available on their Website. I would agree with you that the market is down and the market is bad but I see the financial sector as having bargain basement pricing. Their timing sucks but I have no problems with their decision to remain in that sector.


4. Deregulation went to far but that again the markets will learn and there will I believe be more regulation of new instruments and new financial structures in some form but we will never return to the highly regulated, restricted capital flows of the sixties and seventies. For one I am still all for "deregulation" with a much better structure.




Locke

 

[tommyh]

Down 41% in entirely possible.

Take Berkshire. That is a very well run company with a huge cash hoard and a size comparable to GIC/Temasek - 52wk high $147K, low $74K current $88K. So I think GIC's 41% down is a good figure, probably also based on Nov prices just like temasek.

In short I think GIC is probably down closer to 50% if you take current prices.

 

[Goh Meng Seng]

Dear GMS

Some of the managers for the Havard Endowment Fund are as well paid as wall street bankers :_)). Ok but thats besides the point.

1. Is GIC like a hedge fund ? Not from the report I have read though Though the fact that it probably diversified somewhat into a hedge fund or private equity does not make it one. Does the fact that it makes bets on stocks and property make it a hedge fund, nope not from what I l know and in my view your statement is so far of the reservation it smells of politicking.

2. With regards to the SWF and the unclear and contradictory public statements lets just leave that until more information comes to light.

3. That 40% includes DBS, Barclays , Merrill, Stan Chart and CCB. Information available on their Website. I would agree with you that the market is down and the market is bad but I see the financial sector as having bargain basement pricing. Their timing sucks but I have no problems with their decision to remain in that sector.


4. Deregulation went to far but that again the markets will learn and there will I believe be more regulation of new instruments and new financial structures in some form but we will never return to the highly regulated, restricted capital flows of the sixties and seventies. For one I am still all for "deregulation" with a much better structure.


Locke

1. I believe there are signs that GIC has changed their investment strategy along the way. Temasek has changed and put in 40% in financial side and it is still a SWF. 40% in financial institutions a norm for SWF? I really doubt so. If they could do it for Temasek, they could do it for GIC.

2. It is an OPEN SECRET that they made bets on properties and failing banks in US and Swiss. Politicking? Hardly. This is NOT the first time I commented on their investment strategy, be it Shin Corp or Citigroup etc. On hindsight or backside or front side? Nope. It's right on the dot when they invested even before all of them go under.

3. So the question is, should they made such risky bets? On Shin Corp which is full of political risks? When all those "gurus" were talking about how good bargain they had BET on those big banks, I was questioning the need of making such risky investment, as a SWF! Do they look like they are investing like a SWF? Hell, no. They are acting like greedy punters instead....ones with very bad judgment.

4. If a person like me in politics at the moment do not throw all my sinks at them for such glaring mismanagement, then you should be worrying. Politicking? Hardly. Stating the obvious facts, yes.

5. There is very little justifications for what they have done for the past 4 years and it seems that I am the only one in politics that have been making noises all the while on the kind of investment decisions that they made all this while. Your party? Your party members? Your comrades? And it does not serve Singaporeans well when you, as a known partisan member, do not seem to see and voice out the obvious problems. Politicking? Nah, it makes me wonder whether you are in politics at all.

6. So far, I have made all valid concerns as a politician who is very concerned about the workings of the whole opaque government. Information disparity? That's NOT my problem because it is PAP government that refuses to be transparent with its accountability.

Goh Meng Seng

 

[tonychat]

I don't know but you mean getting petition, making police report and going protest will make a difference?

Goh Meng Seng

Of course you have no experience, you do not understand.

Try to take over the parliament house and force the sinkie loong to resign. If not, then the take over changi airport and the PSA.

You got experience? Oh yeah, i forgot, you got the Hong Kong protest experience. Is it enough to put it in the resume.

This one is too tall order for you. I will put forward to Dr Chee and will listen to what he has to say.

 

[Goh Meng Seng]

Of course you have no experience, you do not understand.

Try to take over the parliament house and force the sinkie loong to resign. If not, then the take over changi airport and the PSA.

You got experience? Oh yeah, i forgot, you got the Hong Kong protest experience. Is it enough to put it in the resume.

This one is too tall order for you. I will put forward to Dr Chee and will listen to what he has to say.

If it could work, it should work long ago. This is not Hong Kong.

Goh Meng Seng

 

[tonychat]

If it could work, it should work long ago. This is not Hong Kong.

Goh Meng Seng

I thought it is the people that should make it work, No???

Or follow the rules so as not to break it so as the person is safe from regulation slaughter.

 

[Goh Meng Seng]

I thought it is the people that should make it work, No???

Or follow the rules so as not to break it so as the person is safe from regulation slaughter.

Dear Tonychat,

You are half right. Yes, it's the people that should make it work. But no, not in Singapore when Singaporeans do not have the liking of such movements.

It works in Hong Kong, not because Hong Kongers are not afraid of breaking rules. But rather there are a substantial number of Hong Kongers who believe in expressing their views via such means.

Goh Meng Seng

 

[Ramseth]

I will put forward to Dr Chee and will listen to what he has to say.

It took about 20,000 Thai protestors to blockade Parliament and airport. Dr. Chee, even if he wants to do it, has to consider:

1. Can 20 protestors blockade Parliament or airport?

2. If not, how can he get 20,000 protestors?

 

[jixiaolan]

3. That 40% includes DBS, Barclays , Merrill, Stan Chart and CCB. Information available on their Website. I would agree with you that the market is down and the market is bad but I see the financial sector as having bargain basement pricing. Their timing sucks but I have no problems with their decision to remain in that sector.

Locke

Of cux, you dun have problem with that. It is not yr money that they lost.

 

[scroobal]

There is one LTC, Long Term Capital that went bust. Was that one under GIC or Temasek?

True, Eastern Europe is a good shopping ground now if you are into property investment. Buying up Tokyo prime properties at low price in the next few quarters may be a good idea too but what about Marina Sands? LOL!

Secrecy is the best weapon for incompetency.

Goh Meng Seng

Guess what bro, after checking around found out that the Chinese Govt and Italian Govt central banks had put their money in LTCM.

Anyway, once you invest in a 1st world entity and it fails, you can't hide. People will know. Because of the cockiness of old man and the PAP, they will reveal such things real quick.

There is a lesson to be learnt from LTCM. They apparently would ask investors to withdraw their investments if the investor asked details of allocationl, strategy, sector performance etc. Sounds familiar. They succumbed within 3 years.

 

[Tiu-leh-see-fart]

Think about it.

What can 58 sing billion do?
Free healthcare, free education , no TV license fee, lower PUB bills, lower car park season parking, cheaper petrol, cheaper cigarettes, cheaper alcoholic drinks, the list is endless......

31% is that of last year Nov, what about December, and so on...

Can you imagine the loss of 41% from GIC ?
GIC only handle singapore reserves? How big is GIC?

The loss from GIC may able to buy an island and build a big town teemed with HDB pigeon holes.

Meng Seng is right, the true figure must be made public.

If no accountability, singapore is as if ruled by thugs and moguls.

 

[scroobal]

Dear Scroobal


Temasek and GIC both have a portion of the state reserves allocated to it. Whilst one is more transparent than the other relatively both were created by the state and have state and CPF surpluses recycled within.

As stated the current statements are conflicting leading to all sorts of conflated issues with GMS throwing everything except his kitchen sink. Firstly the 41% is directly contradictory to previous statements about them being overweight in cash, so the question remains as to how much in cash how much in equities and does that 41% refer to equities or to a total portfolio.

Secondly fundamentally I believe that GIC should invest surpluses and reserves in equities and real estate, in order to preserve value. I have stated that the government should just do a what if from the day it was started assuming a pure T BILL GILT and AAA bond holding and what would be the final value to day under management.

The question would be would you want a lesser value under "safe" management or a higher value which has suffered portfolio losses but probably even after loss is still higher than the "safe" option.


Locke

Gosh, they actually shifted their policy. My god. And of all people, Ng Kok Song.

 

[scroobal]

Reuters article on GIC dtd July 2006. They mentioned about getting higher returns (more risks), investing in hedge funds. Fast forward 1 year to July 2007 and we can see the entity taking big stakes in banks operating in a risky env (they needed GIC money because of weak balance sheets).

I think this article reflects the changing of gears in GIC investment policy. The rest, as we know, is history.

"Asia's hedge funds space is going to be important for us, we are looking for opportunities to invest there," GIC Managing Director for Public Markets Ng Kok Song told reporters, adding that the agency has invested in about 50 hedge funds.

Thanks bro for posting this. This is crazy.

 

[Man in the streets]

41% must be a big amount.

they may argue that the whole money they gamble is not from the reserves but who cares.

better still, the public can know exactly what GIC is doing, what kind of things are they gambling.

common men dont care a damn what investments they gamble, as long as they lose big, i mean very big, the gamblers must be held responsible for the loss.

of course accountability is on their toes if they treat singapore like gambing nation.

another thing, GIC has big very very profits, what kind of trading are they doing, anything illegal ?

 

[lockeliberal]

Dear GMS

Firstly you equated GIC to a "hedge fund". I challenged you strongly on that for proof or statements otherwise. You have yet to answer the question but alluded to other issues and mistimed investments

Ok firstly investing wrongly does not make one a hedge fund. Buffet the sage has admitted to making wrong investments even in this down time, does it make him a " hedge fund" ? Does chasing a better return make him a hedge fund ? Mutual funds, Pension funds, Pension Fund of Norway, CALPERS all chase better returns ....does that make them hedge funds ?

They have lost money on the investments to date. GIC less clear due to conflicting statements, Temasek yes. Fine its for the them to clarify and explain and yes they are doing a damm poor job of it.

If your question is should a SWF make equity investments. I would say yes. Should a SWF be a "money market mutual fund".......I would say no. Should GIC explain its investment mix ......I again would say yes. Should we look at GIC and Temasek in totality and ask ourselves is the mix of equity and bonds optimal, again I would say yes yes yes. But then to call an equity investment a risky bet is like decrying all equity investments as one. Yes some equity investments have blown up, should we ask for examination explaination and accountability, yes. Should we retreat from equity investments ? My answer would be NO,

My party I disagree with half the time and I disagree with you the other half of the time :_)) I am all for fuller disclosure especially for GIC less so for Temasek. Then again taking 1980 as the start of GIC I believe we were better off seeking higher returns from that date, then taking the surplus and just dumping it in gilts and t bills




Locke

 

[lockeliberal]

Dear Scroobal

Again transparency would be key. The Norwegian has a disclosed 60% equity 40% Fixed Income Mix globally. By comparison GIC has 50% equity 30% Bonds and 20% others. It would be interesting to see how much hedge funds constitute a portion of that 20% .


Cheers



Locke

 

[Goh Meng Seng]

Dear Locke,

After all the ranting here, you still cannot understand the gist of the problem.

Is making bets on dying banks a risky thing to do? High risk? No? Never mind about whether a hedge fund or not. I am not even saying GIC is like a hedge fund but simply put, they are acting like a hedge fund when they are making such BETS. SWFs DON'T MAKE RISKY BETS. Period.

What I have put to you is that your apologist perspective of GIC is totally misplaced because they are not hedge funds nor any other ORDINARY fund management companies. The RISK profile of a SWF should be CONSERVATIVE because their OBJECTIVE is NOT about MAKING BIG BUCKS but rather to maintain the value of the funds they are tasked to manage from the erosion of inflation.

If you cannot understand this fundamentals, I think there is no point of arguing on two different planets about it.

Goh Meng Seng