GIC has just announced that its 20-year annualized real return has fallen to 3.7%, almost hitting the 2.6% historical low in 2009.
It is now worried about investing over the next decade, according to a report with a typo in the local media.
Since GIC is worried, the PAP government should just return CPF members our retirement savings and not force GIC to take unnecessary risk which will likely result in more losses. The PAP must stop tweaking/enacting legislations to trap more CPF dollars for GIC to speculate.
Although GIC says it is worried about investing CPF members’ savings, top management will continue to receive multi-million pay packages. Truth be said, CPF members are even more worried than GIC because it had actually lost 50 billion(?) in CPF dollars the previous 2 years.
According to the Sovereign Wealth Centre (SWC), GIC’s portfolio has a current value of S$474 billion.
PAP-controlled media also quoted SWC’s estimate of GIC’s portfolio at S$467 billion in the previous year. This would mean an increase of only S$7 billion from March 2016 to March 2017, a miserable return of 1.5%. How to pay CPF members like that?
But this actually gets worse because GIC’s return is in fact negative.
During the past year, CPF balances – channeled into GIC – had increase by S$29 billion.
If the market value of GIC assets was unchanged, its portfolio would have increased by the same amount of increase in CPF balances, give or take. To have increased by only S$7 billion would mean that:
– GIC’s assets were marked down by at least S$20 billion or
– GIC had realized losses of at least S$20 billion.
The above has not taken into account dividends and interest income. Assuming a 4% return on assets of S$467 billion, GIC would have earned an additional S$18.6 billion in dividends and interest income.
Taking this into account, GIC was likely to have lost/marked down its assets by S$40 billion.
A lower 3% return from dividend/interest income will still mean a loss/marked down in excess of S$30 billion.
GIC was likely to have received additional billions from land sales revenue for investment. Something is terribly amiss.
It is even more alarming when we use estimates from another trusted source, ie the Sovereign Wealth Fund Institute (SWFI), which leads one to conclude there were huge losses/marked down in the previous 2 years.
According to SWFI, it valued GIC’s portfolio at US$344 billion in June 2015 and US$350 billion in June 2016. link
The S$6 billion increase implies a miserable return of 1.7%.
By June 2017, GIC’s portfolio had increased by US$9 billion to US$359 billion, a return of only 2.6%.
In the last 2 years, the value of GIC’s portfolio had increased by less than the increase in CPF funds. Question:
Were assets heavily marked down or were there huge realized investment losses?
If dividends, interest income and additional funds, eg from lands sales, are taken into account, the previous 2 years must have been very bad for GIC.
GIC has also refused to state its expense ratio and prefers to conceal the multi-million pay packages of its top management which has delivered negative returns. Isn’t it time for Parliament to stop acting deaf and dumb? 😦
CPF members should take note that GIC has lost tens of billions in CPF dollars the past 2 years and the government will enact legislations to delay withdrawal. Again.
GIC should clarify the above by being upfront with CPF members. For once. 🙂
Better still, why not just return CPF monies to their rightful owners instead of being worried and forced to take high risk?