GIC is not the long term investor as the PAP government would like CPF members to believe its propaganda.
It is not acceptable that our $264 billion CPF investments have remained undisclosed for more than 3 decades. Why does the PAP government condone poor corporate governance if GIC’s performance has been remarkable? How could CPF investments, belonging to 3,550,000 CPF members, be known only to a handful of politicians such as PM Lee, 2 DPMs and 2 ministers? In fact, more than 90% of MPs do not know where CPF monies are invested.
The PAP government has allowed minimal and selective disclosure of CPF investments by GIC. If Norway’s larger pension fund could regularly disclose its total holdings of about 8,300 equities, 1,000 bonds and 30 real estate investments, what has GIC got to hide?
One of the reasons for GIC to be opaque is to prevent CPF members’ scrutiny of its speculation with our CPF. A few examples have been highlighted in previous posts such as its ‘investment’ in London Mining which was almost 100% wiped out. (chart below)
GIC incurred a $269 million capital loss on a $1.46 billion investment over 7 years, because it speculated that property prices would continue to increase in 2007. It is not concerned about inflated asset prices or business cycles. An investment should generate consistent returns. GIC could always prove everybody wrong with good corporate governance. But it cannot afford to be transparent as more speculative transactions will come to light.
According to the BIS, central banks are inflating “elevated” asset prices due to ultra-loose monetary policies. GIC has also confirmed it is aware of inflated asset prices when it recently stated “prices of all major asset classed have been inflated by the massive stimulus measures, and now face weak future returns”.
If our investments face “weak future returns”, then why is GIC regularly investing in all sorts of foreign assets as if there’s no tomorrow? Has GIC not learnt from the billions of losses it incurred by investing at the height of the housing bubble just before the financial crisis in 2007/2008?
A list of recent investments:
Nov 7 – GIC invests US$274 million in Philippines-based liquor producer Emperador
Nov 6 – GIC enters into a US$1.6 billion joint venture partnership with Scentre Group
Nov 4 – Singapore’s GIC leads US$8 billion bid for Blackstone’s IndCor
Oct 30 – Singapore’s GIC buys into major Turkish developer-owner (S$402 million)
Oct 21 – GIC buys Tokyo Building (US$1.7 billion) in bet on rising property prices
Oct 17 – GIC pours more money (S$482 million) into RAC
Oct 6 – GIC bets on Roman retail therapy (estimated $322 million)
Oct 6 – GIC invests US$150 million in E-Commerce start-up Square
Oct 3 – GIC to buy stake in US$1.6 billion UK airports deal
Oct 2 – GIC becomes strategic investor in Spanish (estimated more than US$252 million)
In 2013, GIC and Temasek (combined) emerged as the most active SWF. Most of the funds came from our CPF which have been increasing at the rate of about $21 billion annually since 2009. Part of this increase comes from the legislated Minimum Sum of $198,500 per CPF member.
GIC has a simple investment strategy – in invests whenever it has the funds regardless of market cycles.
There are of course investments which have yielded relatively good returns but are these sufficient to make up for many investments which have been lost? The PAP government should not be afraid to allow CPF members to scrutinise all GIC investments. After all, GIC’s funds belong to CPF members and citizens.
Anyone who has scrutinised GIC’s investments will come to the same conclusion – it has engaged in speculation and borne unnecessary high risks. Since GIC agrees asset prices have been inflated by the trillions of dollars in monetary stimulus, why did GIC invest S$2.16 billion for a Tokyo building last month? GIC’s investment cannot even guarantee reasonable regular returns for CPF members and GIC has clearly expected Japanese property prices to increase. GIC is not investing for regular income stream for CPF members but again speculating for capital gain.
GIC doesn’t seem to have learnt any lesson from its 7-year investment in the Merrill Lynch Financial Centre which resulted in a capital loss of about S$269 million, excluding millions in transaction costs. Why is GIC still betting on rising property prices despite CIO Lim Chow Kiat acknowledging that “asset prices are high relative to the fundamentals”.
GIC’s other ‘strategy’ in investment – ‘picking bottom’ of stocks which have collapsed. GIC should have just hired local stock market punters instead of paying millions to external fund managers. An example would be its S$168 million 4% stake in UK –based international service company Serco group purchased on 26 June. GIC continued to accumulate Serco shares and its shareholdings increased to 6.4% or 35.17 million shares by 23 July.
Compared to its peers, Serco has the highest revenue but the lowest net income. Serco’s 2013 dividend yield is only 2%. Since GIC couldn’t have been able to pay CPF members even its OA rate of 2.5%, it confirms GIC was expecting Serco shares would somehow rally in future. GIC was speculating to make a capital gain to pay CPF members!
GIC should be aware that after increasing its stake in Serco, the stock collapsed by more than 30% 2 days ago. Does GIC have any exit plan? Will the Serco investment be an almost-total wipe out similar to its investment in London Mining? That GIC ‘investment’ is 40% underwater within 5 months is confirmation of its speculation.
There are many other examples to confirm GIC has been speculating such as buying US$700 million of unrated 4.7% bonds and US$258 million 3.2% note from Chinese companies. Why would GIC ‘invest’ in loans to a Chinese company, exposing our CPF to exchange rate risks with a coupon rate of only 3.2% which is below CPF’s average payout of 3.5% and possibly total loss should the company collapse?
GIC’s investments do not make sense and CPF members must question the PAP government before more speculation result in even higher losses.
GIC has repeatedly stated it manages “well over US$100 billion of assets” for more than a decade. In 2000, the CPF Board had already invested about $60 billion (pg 97) in GIC through the purchase of Special Singapore Government Securities (what’s really so special is the exceptionally low fixed rates for pension returns). By June 2014, CPF had ‘invested’ another $204 billion in GIC! If GIC’s 20-year nominal return in USD is 6.5%, with the additional S$204 billion CPF pumped into GIC, its assets under its management should easily exceed US$300 billion.
Why does GIC continue to conceal such an obvious figure by repeatedly stating the figure of only “US$100 billion”? Why can’t GIC confirm it has more than US$300 billion under management? Is it unable to do so because many of its investments have been lost through speculation?
The government cannot simply expect citizens to believe all is well with our $264 billion CPF managed by GIC with ZERO transparency. CPF members deserve every right to an upfront reply.
Without a doubt, GIC is not investing for the long term but merely speculating with our CPF.