201607010 Will CPF members be stuck with UBS investment for 300 years?

Is GIC as good a fund manager as PAP claims or has it been reckless with our CPF?

One way of assessing GIC is to look at how it manages its largest investment, UBS. This will give one an idea of how smaller investments are managed.

In the case of its $14 billion UBS investment:
– it had clearly thrown caution to the wind and
– did not even have any exit plan. (investment thesis proven wrong)

In one word, GIC has been reckless.

So, is there a big hole in GIC? Why not disclose to MPs where our CPF and reserves are invested? Doesn’t Parliament represent the people or are MPs untrustworthy? Will PAP keep tinkering with CPF rules to further delay withdrawals?


From the chart above, it is obvious GIC committed a serious error made only by novice investors, ie bottom picking. It’s quite puzzling that many investment experts have refused to acknowledge GIC’s recklessness. GIC and PAP have also generated a lot of ‘noise’ in the media to deflect CPF members from its recklessness. Some context is required to understand this issue:

1 Prior to GIC’s S$14 billion bet, the biggest in its history, only 2 investments exceeded S$1 billion, ie Heathrow Airport in 2006 and Seoul’s Star Tower in 2004, according to data on SWFI website. (membership required)

2 Before 2008, the average size of an investment was about S$150 million. UBS was more than 90 times the average investment size and if this had failed, it would require at least 90 average investments to make up for UBS’ poor returns. Since this is almost an impossibility, as there were also other lousy investments, was GIC not reckless by placing an outsized bet in an uncertain environment?

3 From the chart above, it is also clear GIC was bottom fishing. UBS at CHF 47.7 was ‘cheap’ only relative to its recent highs above CHF 70 in 2006/2007. GIC did not consider the downside.

4 Wrongly assuming that the investment was good value, it took GIC only 3 days to ‘invest’ S$14 BILLION to help prop up UBS. Was S$14 billion peanuts?

5 S$14 billion was more than the total actual revenue from land sales in 2 years, ie $5.6 billion in 2005 and $6.3 billion in 2006.

6 Or more than the total CPF contributions in 2007 ($10.7 billion). The possibility of the bet turning sour never occurred to GIC. Perhaps it was expecting the PAP to tweak CPF rules, again, for additional funds?

7 No responsible government has invested retirement funds amounting to a year of their citizens’ retirement savings in a similar manner, not even close.

8 In view of the exceptionally large investment, there was no room for failure and the green light must have been given by someone at the top. Lee Kuan Yew subsequently claimed GIC intended to keep UBS and grow with it for up to 30 years. But Tony Tan wasn’t sure about the time horizon and said GIC planned to hold on to its stakes for “many years”. A professional fund manager can talk cock like this meh? No opportunity cost for this epic mistake?

9 Instead of owning up to its mistake, Chairman Lee Kuan Yew brushed it off and asked naively: “How could we have known this was the extent of the damage?”. A demi god to many unthinking citizens, LKY suddenly became a mere mortal like us?

10 LKY also confirmed bottom picking was alive and well in GIC: “When the market fell, we went into UBS and Citi. But we went in too early”.
Where LKY confirmed bottom picking, CIO Ng Kok Song confirmed picking market tops when he said “such tactical mannoeuvres were abnormal for a long-term equity-oriented investor such as GIC” (pg 12). Ng was referring to divestments near market tops which generated US$16 billion to fund UBS and CItigroup investment. **

11 LKY: “We’ll most probably stay with the financials. Eventually, it must recover. It is the circulation system of the world.” While it’s true we will always need a circulation system, it is disingenuous to confuse the survival of a system vs individual financial institutions. Is it not a fact that every now and then, financial institutions will be taken out of circulation?

12 LKY called the shots in GIC but he was no Warren Buffet: He was a lawyer and politician, not an investment guru. LKY did not know the billions in toxic assets carried by UBS as much as CPF members do not know the billions in underwater investments in GIC’s book.

13 The investment landscape post GFC warrants GIC to reexamine its past investment thesis. But GIC can’t really do anything about the humongous paper loss in UBS: it never had any plan B to begin with.

14 The equivalent of UBS for Temasek is Standchart. Temasek never had any plan B and will continue throwing tax dollars at capital raising for Standchart (Chinese banks akan datang?) as and when required. Plan B would mean a huge loss of face, and a slap, which is worse than a financial loss to PAP.

All said, the manner in which GIC invested $14 billion of CPF monies (and reserves) in UBS is a cause for concern. The wider concern is GIC is likely to have been as reckless with all other investments.

Although LKY had said underwater investments such as UBS may be kept for up to 30 years, it is likely PAP’s goal posts will eventually be shifted. Perhaps to 300 years?


If GIC has nothing to hide, it should be upfront and disclose to CPF members/MPs where our savings have been invested.

Will expand on Ng’s nonsense in another post.

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2 Responses to 201607010 Will CPF members be stuck with UBS investment for 300 years?

  1. Sinkie says:

    Only way out is for GIC & Temasek to buy up UBS & StanChart, and nationalise them. Maybe merge them with DBS.

    • Phillip Ang says:

      Our SWFs would prefer to save their faces but they will eventually weigh everyone down. Then DBS go back to below $2 1980s prices how? I think you have overestimated the capability of our $10 million DBS CEO. 😦

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