Publication: Bloomberg
Date: 29 September 2009
Headline: GIC Says Investments Drop 20%, UBS Stake Has
Loss
GIC Says Investments Drop 20%, UBS Stake Has Loss
By Joyce Koh and Netty Ismail
Government of Singapore Investment Corp.’s assets fell more than 20 percent in the year
to March 31 as the collapse in financial markets drove down the value of its stake in UBS
AG.
GIC, manager of more than $100 billion of the city’s foreign reserves, said it continues to
lose money on the holding in UBS, though it has made a profit on its investment in
Citigroup Inc.
The sovereign wealth fund said it recovered more than half the loss it incurred last fiscal
year, when it outperformed the 30 percent drop in assets at Temasek Holdings Pte, the
city’s other state-owned fund. Under Chairman Lee Kuan Yew, Singapore’s Minister Mentor
and former prime minister, GIC has expanded through investments ranging from the
Franklin Center in Chicago, to the managers of Beijing and Heathrow airports.
“The lion city was pretty well mauled compared to other sovereign wealth funds, and is now
licking its wounds,” said Song Seng-Wun, an economist at CIMB-GK Securities Pte in
Singapore, whose symbol is a lion head. “While the worst may be over, given the excesses
of the last few years, we could find that this recession could still affect the portfolio in years
to come.”
Annual returns in the past 20 years averaged 5.7 percent in U.S. dollar terms, from 7.8
percent in the previous fiscal year, GIC, established in 1981, said in its annual report today.
The 20-year annualized return at Temasek was 13 percent in the 12 months to March 31.
Citigroup, UBS
GIC’s portfolio value had fallen about 25 percent between October 2007 and December
2008, Finance Minister Tharman Shanmugaratnam said in March, after GIC bought stakes
in UBS and Citigroup during the credit crisis.
GIC last week pared its shareholdings in Citigroup to less than 5 percent from more than 9
percent, realizing a $1.6 billion profit on the investment. Its investment in UBS will “take
Publication: Bloomberg
Date: 29 September 2009
Headline: GIC Says Investments Drop 20%, UBS Stake Has
Loss
longer to recover,” GIC said in the annual report. The company said both investments have
recovered “significantly.”
The company said last month it didn’t take part in the placement of 6 billion Swiss franc
($5.9 billion) of Zurich- based UBS shares sold by the Swiss government.
“The investment thesis was to capitalize on the unique business franchises of UBS in
global wealth management, and of Citigroup in global consumer and corporate banking,
especially in the emerging economies,” said Chief Investment Officer Ng Kok Song, 61, in
the annual report. “While both banks still face challenges in returning to profitability, we
maintain our confidence in their long-term prospects.”
U.S., Europe
GIC bought stakes in the two banks “too early,” the Straits Times reported on March 5,
citing Minister Mentor Lee, 86. Unlike Temasek, GIC doesn’t publish a financial statement
and doesn’t give a figure for the value of its assets.
There was a greater risk of rising inflation from the “substantial” stimulus programs from
governments around the world, Ng said in the report.
The subprime meltdown wiped 44 percent off the MSCI World Index, erasing about $24
trillion from the value of global equities in the 12 months to the end of March. Financial
companies worldwide have recorded $1.6 trillion in writedowns and losses stemming from
the collapse of the U.S. subprime mortgage market. The MSCI World Index has rallied 64
percent from this year’s low in March.
The U.S. is home to as much as 38 percent of GIC’s assets, Ng said in the annual report.
Europe accounts for as much as 29 percent and Japan as much as 11 percent, GIC said.
In the fiscal year ended March 31, 2008, its U.S. investments were 34 percent, while
European investments were 35 percent.
Diversified Portfolio
GIC’s investments in stocks dropped to 38 percent, from 44 percent the previous fiscal year,
according to the report. It increased its allocations to alternative investments, including
private equity, real estate and hedge funds, to 30 percent from 23 percent in the year
ended March 31, 2008. Its cash holding rose to 8 percent, from 7 percent. Bond
investments fell to 24 percent of its portfolio, from 26 percent the previous year.
The company said it cut public equities by over 10 percent between July 2007 and
September 2008, helping it avert a larger loss. It bought back the equities at the start of the
year to restore its portfolio’s public equities to its pre-crisis levels.
“The challenge now is for GIC to find pockets of growth in a post-crisis world,” said Melvyn
Teo, an associate professor of finance at Singapore Management University who holds a
Publication: Bloomberg
Date: 29 September 2009
Headline: GIC Says Investments Drop 20%, UBS Stake Has
Loss
Ph.D. in economics from Harvard University. “Currently their exposure to developed
markets is significantly greater than that of Temasek’s and I suspect that is where their
resources are focused and where their strengths currently lie.”
SWFs
Temasek reported a record 66 percent drop in profit in the 12 months to March 31 on
losses from the sale of its stakes in Bank of America Corp. and Barclays Plc, last fiscal year.
Its chief executive Ho Ching said the company will be overweight on Asia going forward,
and the global economy is expected to have a sluggish recovery in 2010.
Last year’s global financial crisis has hit the portfolios of sovereign wealth funds. Their total
assets fell by almost 17 percent to $3 trillion from the end of 2007 to this year, Deutsche
Bank AG said in a report in July.
“The market environment in 2008 was one of the most difficult faced by investors in the last
50 years,” GIC Deputy Chairman Tony Tan said in the annual report. “Like all large
institutional investors around the world, GIC found its portfolio impacted by the severe
downturn in the world’s economic and financial markets in 2008.”
Norway’s sovereign wealth fund posted a record 633 billion- krone ($109 billion) loss last
year, wiping out gains over the past 12 years. China Investment Corp., which has stakes in
Morgan Stanley and Blackstone Group LP, posted a negative 2.1 percent return on its
global investment portfolio last year.