GIC lost 41%? Accountabiliity please!

[scroobal]

The objectives of GIC: To preserve and enhance the international purchasing power of Singapore's reserves, by achieving a real rate of return over and above the G3 inflation rate over a long-term horizon.

http://www.gic.com.sg/aboutus_profile_mission.htm

It is therefore, preserve + taking risk (but a question of how much over and above ie how much risk - I leave this for you to decide)

GMS assumed only the "preserve" role.

Actually GMS is right. The final goal is to be "above G3 inflation rate over a long-term horizon."
I don't think this was the case. You cannot preserve without taking risk and it has been standard practice to aim to cover inflation. Anything above is looking for higher returns.

 

[lockeliberal]

Dear Scroobal

Siang Nee has a good article in little speck. A Good take away is the lack of leadership and explanation.

http://www.littlespeck.com/content/economy/CTrendsEconomy-090214.htm

Cheers

Locke

 

[Goh Meng Seng]

Dear Locke,

Whether you like it or not, IT IS GOING TO BE POLITICAL because it involves PUBLIC MONEY.

And for a topic that is inherently POLITICAL, it would of course natural for politicians to talk about political accountability for it.

And I have no regrets of politicizing it at all.

Goh Meng Seng

 

[scroobal]

Dear Scroobal

Siang Nee has a good article in little speck. A Good take away is the lack of leadership and explanation.

http://www.littlespeck.com/content/economy/CTrendsEconomy-090214.htm

Cheers

Locke

Thanks Bro, balanced article.

 

[Zombie]

Anything above is looking for higher returns.

"Preserve" purchasing power means you take enough risk to achieve a return equivalent to the inflation rate. Generally, this means normal profits.

"And Enhance" purchasing power means you have to take higher risk (ie over and above) than that is normally required to "preserve". Generally, this means supernormal profits.

GIC's objectives are to "preserve and enhance" ie higher return, and naturally higher risk.

 

[Papsmearer]

dear scroobal

siang nee has a good article in little speck. A good take away is the lack of leadership and explanation.

http://www.littlespeck.com/content/economy/ctrendseconomy-090214.htm

cheers

locke

stop wasting your breath. The time for words is long past. The time for action is now.

 

[Papsmearer]

dear locke,

whether you like it or not, it is going to be political because it involves public money.

And for a topic that is inherently political, it would of course natural for politicians to talk about political accountability for it.

And i have no regrets of politicizing it at all.

Goh meng seng

stop wasting your breath. The time for words is long past. The time for action is now.

 

[scroobal]

"Preserve" purchasing power means you take enough risk to achieve a return equivalent to the inflation rate. Generally, this means normal profits.

"And Enhance" purchasing power means you have to take higher risk (ie over and above) than that is normally required to "preserve". Generally, this means supernormal profits.

GIC's objectives are to "preserve and enhance" ie higher return, and naturally higher risk.

In that case, they were trying have their cake and eat it at the same time. Its is not a mutually exclusive approach - preservation and enhancement. Might as well drop the preservation label all together. Let this be an elections issue.

 

[Ramseth]

Dear Locke,

Whether you like it or not, IT IS GOING TO BE POLITICAL because it involves PUBLIC MONEY.

And for a topic that is inherently POLITICAL, it would of course natural for politicians to talk about political accountability for it.

And I have no regrets of politicizing it at all.

Goh Meng Seng

Very funny. Last year when the NSP went distributing aids to poor families, you argued tooth-and-nail against politicising. How come then, you didn't see, it was going to be politicisation because it involved the activity of a political party in public?

 

[Goh Meng Seng]

Very funny. Last year when the NSP went distributing aids to poor families, you argued tooth-and-nail against politicising. How come then, you didn't see, it was going to be politicisation because it involved the activity of a political party in public?

Dear Ramseth,

Charity work is charity, politics is politics. I hope you are not saying Public Money in GIC and Temasek are charity money for foreign countries!

Goh Meng Seng

 

[lockeliberal]

Dear Scroobal

Well if its pure preservation then it would be a 100% inflation proofed bond portfolio. That is reserves do not grow or barely grow at the rate the money is put in. Majority of SWF's have decided that Holding T Bills for Uncle Sam and letting inflation erode it away or not doing anything is just not the way to go. If we decide that we need returns above inflation then risk comes in , the degree of risk, disclosure of risk and explanation and transparency to you and me the citizen. Personally I am all for growing through profit and not just protecting principal against inflation



Locke

 

[Ramseth]

Dear Ramseth,

Charity work is charity, politics is politics. I hope you are not saying Public Money in GIC and Temasek are charity money for foreign countries!

Goh Meng Seng

And I hope you don't confuse giving foreign aids and placing foreign investments. Whether these are too speculative stakes or not, that's the issue.

 

[Goh Meng Seng]

And I hope you don't confuse giving foreign aids and placing speculative stakes.

Nah, I am not confused at all. Ask your pal instead.

Goh Meng Seng

 

[Zombie]

Might as well drop the preservation label all together.

Precisely. It makes no sense to hang onto the "preserve" label.

 

[scroobal]

Precisely. It makes no sense to hang onto the "preserve" label.

I think they used the term "preservation" to be politically correct and they now look like duffers.

 

[Goh Meng Seng]

Precisely. It makes no sense to hang onto the "preserve" label.

For an investment arm that associate itself with "preservation" of capital funds, it would naturally mean that for any investment decisions made at any point of time, the possibility of losing ALL money would be nearly zero.

But investment in those banks which are failing involves higher possibility of bankruptcy, cannot be considered as an appropriate investment for any investment entity that hold on to the concept of "preservation of capital". It simply means that they screwed up without following their core value and concept.

Goh Meng Seng

 

[rainnix]

Dear Locke,

You still don't get the FUNDAMENTAL point after reading such detailed analysis!

The fundamental point is NOT about how many percentage SWFs should hold in various equity or bonds combinations!

The FUNDAMENTAL POINT is that SWFs are SUPPOSED to PRESERVE the value of the capital that they are being entrusted with!

And the FUNDAMENTAL POINT is NOT about whether the RISK RETURN ratio is comparable but rather SWFs ARE NOT SUPPOSED TO MAKE HIGH RISKY BETS AT ALL!

The comparison made between Hedge Fund and SWFs are to point out the difference in the Risk Profiles that each supposed to have. If SWFs begin to take high risks, then it is no difference from Hedge Fund as the fundamental principle of investment rule is to make as much money as possible by taking comparably HIGH RISK!

The difference SWFs SHOULD HAVE from hedge funds is that their fundamental role is to PRESERVE CAPITAL VALUE from the erosion of inflation INSTEAD OF taking high risky bets to get high return!

Goh Meng Seng

It's not that locke didn't understand the point, he is just refusing to accept the fact.

Even I - with limited education and knowledge, knows what you are talking about. Too much of write ups, English flip-flaks and nonsense.

Put it more simply is that Temasek has put too much chips on the gambling table.

 

[scroobal]

But investment in those banks which are failing involves higher possibility of bankruptcy, cannot be considered as an appropriate investment for any investment entity that hold on to the concept of "preservation of capital".
Goh Meng Seng

UBS, Merill and Citibank were at that time considered blue chips and their shares values plunged heavily. No one in living memory would have thought that they would go their way that they did. The mindset of most people is the deep discount opportunity that rarely appears in blue chips.

At that time, I would not consider them as risky. Others, other than SWF did not go in as they did not have deep pockets so it is not a reflection that others were wiser.

However, these 3 alone should not have caused that huge slump for the whole portfolio.

I would agree with you that preservation was not the order of the day when it should have been but I disagree about your remarks about the banks being risky.

It will be good to see what other investments caused these loses and the lessons to be learnt.

 

[Zombie]

I think they used the term "preservation" to be politically correct and they now look like duffers.

If you shoot them for failing to observe very strict capital preservation, now instead of having done so in the many years that had gone by since 1981, it may backfire onto you.

There must be a reason that a few billions in 1981 can peak at $550(?) billions recently, but nobody (I think) was really complaining.

 

[scroobal]

If you shoot them for failing to observe very strict capital preservation, now instead of having done so in the many years that had gone by since 1981, it may backfire onto you.

There must be a reason that a few billions in 1981 can peak at $550(?) billions recently, but nobody (I think) was really complaining.

I believe the strategy change occurred in 2006. Prior to that it was preservation. There is a comment by some other forummer earlier in this thread.