CPF fund manager GIC’s return figures quoted by LKY suspect

CPF LKY 31In 2011, then-chairman of GIC LKY trumpeted to the world that GIC’s 30-year return in USD was on par with global equities return, ie 10.2%.

If something sounds too good to be true, it probably is. 🙂

The simple reason is – according to own self disclosed history in 2013 – GIC’s portfolio consisted of 40% bonds and 30% cash for almost 19 years since inception!

A portfolio which was “decidedly conservative” earning 10.2% returns for 30 years, similar to a high risk one with 60% equities? Hmm …who was LKY kidding?

It’s not that difficult to confirm that GIC return figures are suspect. This can be done by using data provided by SWFI, ie its AUM was US$350 billion in 2016. Even if other figures are used, say US$400 billion or US$450 billion, the end result is the same: GIC’s figures are suspect.

Working backwards from GIC’s 3.7% USD 5-year return in 2016, its AUM was US$291.86 billion in 2011. Assuming LKY’s 30-year 10.2% return was factual, this would mean GIC was managing about US$15.84 billion at inception. Calculator

This would also mean that GIC made US$276 billion ($291.86 – $15.84) over a 30-year period from 1981.
CPF LKY 31
Of course we know for a fact that it couldn’t have generated US$276 billion because GIC had also received additional CPF funds and government reserves/budget surpluses.
Additional CPF contributions (net of withdrawals, excluding interest earned by GIC) from 1989 to 2010 amounted to S$86.716 billion*.

What about additional CPF contributions from inception to 1988? For ease of calculation, the total additional net CPF contributions was about $110 billion.

GIC was also managing land sales revenue which amounted to at least US$100 billion**.

LKY had implied that GIC increased its portfolio value by US$276 billion from 1981 to 2011. But since US$168 billion came from additional CPF funds and land sales revenue – not GIC’s investment gains – it could not have made 10.2% 30-year returns in USD.
​
​It is likely the government has lied to CPF members and that is the sole reason for concealing material information. Why did the PAP amend the Constitution, if not to elect a president who would not raise a single question on transparency in the management of our CPF and reserves?

I hope there are mathematicians who are able to provide further input to clarify my doubts, if possible.

Until then, CPF members should not anyhow accept GIC’s return figures which are suspect.

​*
MAS AR figures, eg

CPF net contributions from 1989 to 2010 (in S$ mil)

​​**
Minister Tharman: “But in fact, the GIC is investing the surplus from the sale of land and “more than 30 years” of earlier government surpluses.”

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