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