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.