GIC still trying to save face after massive UBS loss, “combined strategy” made peanuts returns

CPF fund manager GIC was reported to be facing a possible record loss of US$4 billion on a single investment. “GIC faces possible US$4b loss on UBS bet: IFR
There are of course many more underwater investments which is why the PAP government has refused to be transparent. It is also strange that not a single elected MP has mentioned this issue in Parliament. 😦

In a desperate face-saving measure, GIC has spun the massive loss into something positive: “..combined returns for UBS and Citi were positive in “mark-to-market terms.”

GIC has attempted to mislead Singaporeans because the positive combined returns is … PEANUTS. Really.

When GIC realized a US$1.6 billion profit after selling half its stake in Citi in 2009, it was reported that GIC was still sitting on a US$1.6 billion unrealized profit. This was based on Citi’s share price of US$4.43.

Now that it has rallied to about $60, GIC’s unrealized profit has doubled to about US$3.2 billion. (US$1.6 billion paper profit derived from the difference between buying price of US$2.95 and US$4.43. Current price of Citi is about double the earlier difference.)

Assuming GIC had sold Citi shares near recent highs of about US$60, the maximum total realized + unrealised profits would have been US$4.8 billion, ie US$1.6 billion (2009) and US$3.2 billion recently, with Citi share price at about US$60.  (We’ll ignore the peanuts dividends**.)

Taking into account the US$4 billion possible losses in UBS, net profit from the biggest ‘combined strategy’ investment in the universe is …. US$0.8 billion. (US$4.8 billion (Citi’s profit) – US$4 billion (UBS’ loss) = US$.8 billion.)
As can be seen, from the above, the annualized 9-year return is less than 0.8%.

GIC was unable to disclose any figures for its “combined strategy” investment because the positive return was embarrassingly low.

But one thing is certainly positive about GIC’s US$10 billion plus “combined strategy” investment – it made peanuts returns. 😦

​**
Since the 3rd quarter of 2011, Citi has paid the following dividends:
– 15 quarters US$.01
– 5 quarters US$.05
– 4 quarters US$.16.

6 years’ dividends = US$1.04.

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One Response to GIC still trying to save face after massive UBS loss, “combined strategy” made peanuts returns

  1. Confused says:

    “Assuming GIC had sold Citi shares near recent highs of about US$60, the maximum total realized + unrealised profits would have been US$4.8 billion, ie US$1.6 billion (2009) and US$3.2 billion recently, with Citi share price at about US$60. (We’ll ignore the peanuts dividends**.)”

    There is a need of explanation here, I believe.

    The shares were bought at price of US$2.95 and 50% was sold at US$4.43 to make the US$1.6B.

    The CItigroup shares were consolidated(split) in 2011 by 1:10; meaning the 10 shares were combined into 1 with the resulting share price reflected with 9 times increase in value. In a nutshell, nothing has changed. Not that GIC has captured a big fish at US$2.95 to US$60(Not this===>more than 19 folds increase). In real term, it’s 2.95 to 6.00 which is not a bad deal. But in terms of absolute gain, it is nowhere near the loss of UBS.

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