A few years ago, CPF fund manager, GIC, had already acknowledged global asset prices were overinflated. Yet, the government has been channeling additional billions in CPF into GIC.
GIC expected market downturn years ago
GIC had actually been anticipating a market downturn after 2013, as evident by its shifting away from risk: riskier assets were converted into ‘Nominal Bonds’ and ‘Cash’. Data from GIC reports.
* ‘Cash’ no longer disclosed
The flip side is this asset class does not earn a sufficient rate of return to pay CPF members and therefore GIC was forced to assume higher investment risk in other asset classes.
GIC concealing ‘Cash’ position
GIC has a serious issue with transparency. This has been highlighted in numerous posts.
From the above table, it should also be obvious that GIC had tried to conceal its ‘Cash’ position after 2013 by commingling with ‘Nominal Bonds’. Any other fund manager would have been taken to task by shareholders/stakeholders, probably given the boot.
The PAP government, if it is not trying to conceal any material information from Singaporeans, should not condone poor corporate governance by GIC and disclose a breakdown in ‘Cash’ and ‘Nominal Bonds’.
‘Cash & Nominal Bonds’ increased 10%, earning peanuts?
From 2008 to 2013, ‘Cash & Nominal Bonds’ averaged 25% of GIC’s portfolio. This has increased by 10% to 35% in 2017. With rock-bottom interest rates, this would mean that GIC’s portfolio has not been very productive, ie 35% of assets earning peanuts returns.
According to SWFI, GIC’s AUM is estimated to be US$359 billion or S$494 billion.
Is S$173 billion (35%) earning peanuts returns?
If the above is true, why does PAP amend legislations to trap our CPF in GIC?
Wouldn’t it be a win-win situation to return CPF to retirees at 55?
CPF risks have multiplied
In the 3 years before global stock markets began to collapse in 2007, net CPF contributions amounted to only $11.28 billion. In the last 3 years, net CPF contributions amounted to $42.29 billion.
Since global assets are overinflated and GIC has invested more CPF in these assets, doesn’t this also mean CPF members’ risks have multiplied?
GIC’s increasing AUM due to PAP removing CPF goal posts
GIC may be the envy of many fund managers but in reality, its performance sucks. Its AUM has seen a phenomenal increase not because of its superior performance but due to PAP tweaking CPF legislations.
From 2007 to 2016, net CPF contributions – less CPF interest – amounted to S$122 billion.
A substantial amount came from retirees who were forced into a pay-until-you-mati instalment plan by PAP, after postponement of the withdrawal age.
Under PAP’s PUYM plan, every member had to maintain an additional $66,400 ($166,000 – $99,600) in GIC at 55.
From 2007 to 2016, the CPF Medisave Minimum Sum increased by $20,500 from $28,500 to $49,000. Together with the $66,400 increase in the OA Minimum Sum, PAP forced every CPF member to retain an additional $86,900 in GIC at 55.
In view of the increased investment risks as well as GIC’s subpar returns, wouldn’t it be a win-win situation for PAP to return CPF members our retirement savings?
Why is GIC forced to take additional risk, investing additional billions from retired CPF members in overinflated foreign assets? Or is GIC in desperate need of funds to conceal massive losses?