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.
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?