With all the pock kai CPF investments and UBS loss, GIC’s 6% long-term returns questionable

Singaporeans should think and question the management of our CPF.

Why is GIC able to pay CPF members only about 3% returns (on average) when across the causeway, Malaysia’s EPF has been paying 6% for the last 20 years?

Why is GIC’s management of our $328 CPF not accountable to Parliament but a PAP-friendly President? And it doesn’t help to have elected opposition MPs who are not interested in CPF/GIC/Temasek transparency. 😦

When CPF members question the government, only then will we begin to realise that we have been had. 😦 (Many still don’t understand the significance of GIC’s losses in UBS.)

That GIC is reckless is a fact, ie it committed S$24 billion in 2 banks at the height of the subprime mortgage crisis without doing sufficient due diligence. (invested S$14 billion in UBS within 3 day)

To put the amount into perspective, S$24 billion was more than 15% of the $150 billion CPF balances in 2008. Without US government intervention, Citi would have gone bust.

Going by its reckless investment record, GIC’s 6% long-term returns is really questionable. This is because it has too many other pock kai, deeply-submerged investments which require a miracle to offset their losses.

GIC unable to offset UBS losses unless it takes very high risk

The UBS investment will likely lose at least US$4 billion, including recently-realized losses. TOC article

Assuming a modest 6% target return, GIC was supposed to make $5.5 billion over 9 years in the UBS investment; it has instead lost $4 billion.

This would mean that other investments had to generate an additional $9.5 billion ($4 billion loss + $5.5 billion expected profit) to offset the loss. Otherwise, GIC would not be able to achieve its 6% long-term return.

Citi’s profits contributed little

Propaganda would have us believe that Citi’s profit contributed significantly. In reality, Citi’s profit was probably less than half of the $9.5 billion ‘loss’. This means that other investments had to generate much higher returns to offset the ‘loss’.

Impossible to achieve 6% long-term returns

Besides Citi, GIC did any similarly-large investment with high returns to offset UBS’ losses. At that time, more than 90% of GIC’s investments were valued at less than $500 million.

It would then require tens of smaller investments to generate 15% returns over 9 years to offset the UBS’ ‘loss’. This is impossible.

We should also take into account that there were also numerous losses among smaller investments. Eg:

GIC remains a major Paladin Energy shareholder despite its shares having collapsed 99% since 2007.

gic 7

gic 6

From a high of $9.66, Paladin is now worth less than 6 cents.gic 8

GIC’s 6% long-term returns is highly questionable. Perhaps this is why PAP is able to guarantee CPF members only 3% average long-term returns.

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1 Response to With all the pock kai CPF investments and UBS loss, GIC’s 6% long-term returns questionable

  1. Sinkie says:

    http://www.gic.com.sg/report/report-2015-2016/investment-report.html

    Well, even GIC admitted that it’s last few years’ performance was only 3.7% annualized nominal return. That’s not even real (after inflation) returns.

    Therefore for the past 5 years, GIC’s investments of CPF monies have barely covered the average interest costs.

    It doesn’t take a genius to realise that at this rate, govt will need to make the CPF rules even stricter to prevent people from withdrawing their CPF.
    Tactics already in-place:-
    1. Use of Retirement Sum & Basic Healthcare Sum to prevent withdrawal at 55.
    2. Further accelerate the increase of Retirement Sum & Basic Healthcare Sum.
    3. CPF Life black hole calculations to reduce the monthly payouts.

    Tactics KIV:
    1. Increase the age at which CPF Life starts monthly payouts. Currently 65 — can increase to 67 or even 70 yrs old. This one very likely — probability of 90% within next 5 years.
    2. Reduce the little amount that can be taken out at 55 if you don’t meet the Basic Retirement Sum + Basic Healthcare Sum. Currently up to $5000 can be taken out — can reduce to $4000 or less.
    3. Change the CPF Act to reduce the minimum interest rates. How about 1% or even 0.5% — they can tell you still better than POSB savings account what.

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