Biggest CPF investment suffers massive loss

I refer to Bloomberg article, “Disappointed with UBS loss, Singapore’s GIC fund cuts stake”. link

GIC is now paying the price for speculating in UBS at the height of the subprime crisis. With government blessing, GIC had pumped in S$14,000,000,000 into the unknown only 3 days after it had received an SOS from UBS chairman.

In 2008, GIC had claimed that its investment in UBS was “unique“. Really?

GIC had invested CHF11 billion in December 2007 and converted the notes to 230 million shares 2 years after UBS shares had collapsed. Taking into account the CHF2 billion in interest payments, GIC would have invested about CHF9 billion. Including dividends over the last few years, GIC can be considered to have invested in UBS at about CHF37 per share. (for ease of calculation, use CHF instead of S$)

Lee Kuan Yew: “We are buying something that we intend to keep for the next two to three decades and grow with them.”

But in less than one decade, CEO Lim Chow Kiat now tells us that “conditions have changed fundamentally since GIC invested in UBS in February 2008” and would rather “redeploy these resources elsewhere”. Lim has hinted that GIC plans to dispose of the losing UBS investment soon.

Lee Kuan Yew should have known that markets are not static but why did he not take this into account but assured Singaporeans that UBS was for the long haul? Was LKY talking cock or engaging in half truths to prop up our confidence in GIC’s speculation?

Including the 10% plus forex gain, GIC would have still incurred a capital loss of about 50% over almost one decade or 5% a year.

CHF appreciated against S$ by about 10%







If GIC could lose money on the biggest CPF investment, how does it recoup gargantuan losses from other much smaller investments? Is this the reason why it has increased the size of its regular bets to billions of dollars? Is this also the reason for CPF OA rates to stay at 2.5% for more than 2 decades?

Who gave the green light? Tony Tan? Why has no one from GIC been held accountable for losing billions on a single investment? Were they investing or just tikam tikam, knowing there will be $20 billion plus in CPF for GIC to speculate every year?

Why is GIC afraid to disclose other investments which it claims have been profitable, making 4% real returns over 20 years? Or are there too many pock kai investments too pai seh to disclose?

This entry was posted in CPF, GIC, POLITICS. Bookmark the permalink.

3 Responses to Biggest CPF investment suffers massive loss

  1. Sinkie says:

    GIC is selling off 47% of its UBS investment. This 47% used to be US$4.7B in Dec 2007 at the start of its financial investment misadventure.

    Now GIC is going to get back only US$1.6B from this 47% portion. This is a -66% loss.

    GIC still holding on to the other 53% portion in UBS. Now only worth US$1.8B — used to be US$5.3B

    Back in 2009, LKY said this financial investments are going to be very long term, 20 to 30 years. Too bad he died before he can eat his own words.

    Another thing of concern is the decline in GIC investing returns. Back in 2006, LKY revealed for the first time that GIC was able to produce 5.3% real returns since its creation, similar to investing in a plain S&P500 ETF but with lower volatility.

    Now the latest is that GIC is only doing 4% real returns SINCE creation. Which means that GIC has been achieving LOWER than 4% in the last 10 years. And with all the blow-ups in investments over the years, volatility will be similar to any cheap equity ETF or index fund.

    In other words, all the multi-million dollar investment managers at GIC is not adding any value. In fact they are contributing to NEGATIVE value. I think it’s high time GIC listened to Warren Buffet and simply invest in low-cost diversified ETFs or index funds. The entire US$300B GIC funds can be automatically invested & re-balanced by computer costing no more than a few 10s of thousands per year, instead of the $100+M price tag currently.

    • Phillip Ang says:

      Including the CHF2 billion from the 9% coupon and dividends, the UBS investment probably lost about CHF4 billion at current share prices.
      When global stock markets collapsed, LKY sheepishly asked: “How could we have known this was the extent of the damage?”

  2. Confused says:

    “Why is GIC afraid to disclose other investments which it claims have been profitable, making 4% real returns over 20 years? Or are there too many pock kai investments too pai seh to disclose?”

    Hmm, it sounds quite unbelievable why they refused to disclose? If the real return is 4% over the last 20 years considering the many bad buys in 2008/9 and the ever increasing fund injection ($20B) every year, it must be considered a decent return. It should be show and tell. It would simply mean that our $100B 20 years ago would now be at least $219B and with almost 20B from our CPF channeled goes into GIC every year for the last 6 to 7 years, we would have a healthy 350B to 400B now in GIC…..?

    However, whether how the 4% real return is calculated is another matter. Would there be no qualifications by any foreign qualified auditors if audited?

    Nothing beats being transparent to save all these speculations. Many Singaporeans would be qualified to judge the claim, I believe. It’s not rocket science.

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