There is compelling evidence that all is not OK with CPF fund manager GIC.
Thanks to fellow bloggers, a critical piece of information, ie GIC’s AUM at inception and its initial years, has been found. 🙂
GIC invests our CPF and land sales surplus.
GIC has published long-term rates of return (unverifiable)
1 – GIC has tried to prevent computation of its actual rates of return but has mistakenly thought that it has deleted all material information from the internet. For example, LKY’s 1984 rally speech (pg 23) has revealed CPF balances from 1980 to 1984: CPF is supposedly invested by GIC.
From the data, I will compute their returns till 2016 by using its 20-year rate of return and an estimated low return after year 20.
GIC’s 20-year rate of return in Singapore dollar from 2001 to 2009. (see 2008 – 09 report, pg 10)
2 – Returns from CPF invested from 1981 to 1984 is shown in the table below. (Computation of net increase after 1981, rounding off rate lower)
3 – An investment in 1981 doesn’t cease earning returns after 20 years in 2001. Likewise for others.
For ease of computation, I will use a very conservative figure of a 4% rate of return after year 20. (For more than a decade, GIC has been has been paying an average CPF rate (OA + MA + SA) of 3.5%).
From the above, the capital injection of about $23 billion in CPF should have increased to $178 billion in 2016.
4 – Extrapolate from this, GIC’s assets should have exceeded $1 trillion today. This is because its total capital injection is almost 20 times of the $23 billion in the example above. But according to the Statement of Assets and Liabilities, it is way off the mark.
It appears that GIC’s return figures are therefore fake.
5 – With regard to other sources of capital injection, we know for certain there was a massive injection of surplus in land sales of at least $250 billion since 1981. From 2005 to 2016, actual land sales revenue amounted to almost $150 billion.
In the preceding 24 years, land sales revenue could not have been less than $100 billion because HDB was doing very brisk sales from 1981 to 2005: HDB sold about 633,000 dwelling and commercial units.
The price of a HDB unit paid by a lessee includes land cost, ie revenue to the government. Although land cost might have been proportionately lower in earlier years, it gradually increased to up to 60% of the price of a HDB unit. For bigger units, lessees paid more than $200,000 in land cost.
Even if half the number of new HDB units had a land cost of only $50,000, this would have earned the government more than $150 billion.
6 – From 1985 to 2016, about $180 billion in CPF – excluding interest paid by GIC – was injected into GIC. (published figure of $171 billion from 1989 to 2016, 1985 to 1988 conservative estimates of $2 billion annually)
7 – The capital injection of $250 billion from land sales revenue and $180 billion CPF amounted to $430 billion.
8 – Such a huge capital injection should have seen GIC’s assets ballooned to more than $1 trillion in 2016 based on average rate of return. This is unfortunately not the case.
It leaves one to conclude that something is seriously amiss at GIC and its return claims are all fake.
Poor governance at GIC is a cause for concern and could only be addressed by GIC publishing a full set of accounts for scrutiny by Parliament.
GIC is managing more than $340 billion in CPF and its dismal performance concerns every Singaporean member. This is because PAP will subsequently devise ways to retain more of our CPF, besides lowering returns.
The above 2 instances have confirmed GIC’s rates of return to be fake. If not, GIC should clarify.