Josephine Teo: GIC, Temasek won't take more risks

[Baal]

http://www.tremeritus.com/2014/03/09/josephine-teo-gic-temasek-wont-take-more-risks/

 

 

Josephine Teo: GIC, Temasek won’t take more risks

 

March 9th, 2014 | Author: Editorial

Josephine Teo

 

In Parliament on Friday (7 Mar), Senior Minister of State for Finance Josephine Teo said that any rise in Singapore’s spending needs over time should not drive GIC and Temasek to take on more risks.

 

The solution lies in the government’s budgetary measures, rather than a change in these entities’ investment strategies, she told the House.

Under the current Net Investment Returns (NIR) framework, the government can tap up to 50% of the long-term expected real return from the net assets managed by GIC and the MAS for its budgetary spending,

 

GIC and Temasek “must continue to invest with the aim of achieving good, risk-adjusted returns over the long term”, which they have achieved so far, she said.

 

Ms Teo was responding to Ang Mo Kio GRC MP Inderjit Singh, who was concerned that the government may be spending too much from its investment returns.

 

Even so, some of GIC and Temasek’s investment losses in recent years appear to suggest that both entities may have been taking a lot more risk than Ms Teo is willing to admit.

 

GIC

In late 2007, GIC invested a massive 11 billion Swiss francs (then S$14 billion) – GIC’s largest investment ever – for a major stake in UBS [Link]. According to Reuters, GIC’s investment in UBS was later converted to UBS shares at 47.7 Swiss francs, making GIC the largest shareholder of UBS at 6.6% of equity [Link].

 

Based on Friday’s (7 Mar) closing price for UBS shares of 18.63 Swiss francs, GIC has lost some 61% or S$8.5 billion.

UBS share price in Swiss francs (CHF):

 

 

 

 

In its defence, GIC says on its website [Link]:

 

For UBS, as we said in late 2008, our timing could have been better and the investment is still finding its footing. GIC’s view of UBS’ fundamental strength as a well-capitalised bank with a strong private wealth management franchise remains unchanged.

GIC manages risk by investing in a well-diversified portfolio, with a balanced distribution of asset classes and their underlying business sectors and geographies. This, too, is why GIC’s performance has to be measured on the basis of its overall portfolio rather than by how much it makes or loses on individual investments.

 

In 2006, at the height of the US real estate bubble, GIC made a US$675 million investment – comprising US$100 million in equity and US$575 million in loans – in the Stuyvesant Town/Peter Cooper Village complex in Manhatten, New York. The management of the complex, Tishman Speyer Properties and BlackRock Realty, defaulted on their loan in 2010. GIC then booked a loss on the US$675 million investment, as reported by Reuters [Link].

 

Reuters said, “GIC did not disclose its exposure or say how much it wrote off, although court documents indicate the Singapore fund held $100 million of equity and $575 million in mezzanine debt issued by the owner of the Stuyvesant Town/Peter Cooper Village complex in Manhatten.”

 

Temasek Holdings

What about Temasek? Let us see how Temasek made some of its investments.

In May 2007, Temasek bought 55 million shares of ABC Learning at A$7.30 a share for a 12% stake. The investment cost Temasek A$402 million. As the share price fell in early 2008, it bought more shares and increased its stake to 14.7%, making it the second largest shareholder in ABC Learning [Link]. Then a series of events happened:

 

• An unexpected drop of 42 per cent in profit in the second half of 2007 to $37.1 million and its inability to service its $1.8 billion debt triggered a decline in the company’s share price. Several directors of the company were forced to dump millions of shares after receiving margin calls in February 2008 [Link].
• In August 2008, shares of ABC Learning were halted from trade when the company failed to release its latest earnings [Link].
• In November 2008, the company went into receivership. An estimated A$850 million was owed to its banks. Shareholders would not receive anything, the Sydney Morning Herald reported [Link].
• By April 2009, it was announced that some of the ABC Learning centres were sold to charity, Mission Australia, for $1 each [Link]. Mission Australia spokesman Paul Andrews told the Australian media, “We got a really fantastic deal.”

 

In less than 1.5 years from the day Temasek invested in ABC Learning, it was game-over for Temasek.

 

In May 2009, Financial Times (FT) reported [Link] that Temasek had pulled out of its investment in Bank of America, selling its 3.8 per cent stake in the US group. Temasek is estimated to have lost at least US$2 billion on an investment foray that began with it taking a stake in Merrill Lynch in December 2007 for US$5 billion. The Merrill Lynch shares were later converted to Bank of America shares after Merrill Lynch merged with Bank of America. Temasek did not disclose when it disposed of the Bank of America stake or at what price, FT said.

Are GIC and Temasek already taking a lot more risk than Josephine Teo has assured the House?

 

What do you think?

 

[Wt_know]

longggggggggggggggggggggggg term investment .....

 

 

Based on Friday’s (7 Mar) closing price for UBS shares of 18.63 Swiss francs, GIC has lost some 61% or S$8.5 billion.

Edited March 9, 2014 by Wt_know

[The_Bear]

Who cares? It's not my money.

[Vid]

Who cares? It's not my money.

 

Ya... it's ah gong's money. They will find some ways to top up their losses

[Jman888]

How come she can tell a multi-billion dollar company what not to do?

[Neost]

Who cares? It's not my money.

Oh, my CPF goner liao

[Atonchia]

 

Ya... it's ah gong's money. They will find some ways to top up their losses

 

 

How are they going to do the top up?

[Blackyv]

How come she can tell a multi-billion dollar company what not to do?

Isn't it obvious enough... Ah gong own these company and she has says in what to do and what not to do..

[Vid]

 

 

How are they going to do the top up?

"There's nothing wrong with collecting more money." - LKY

[Hydrocarbon]

How are they going to do the top up?

 

You and me lor..

[Raychay]

 

 

How are they going to do the top up?

Raise employer CPF?

[Atonchia]

"There's nothing wrong with collecting more money." - LKY

 

I think we all agree with the above statement.

 

What we don't agree is, what was done with the collected money .

and the BS of saying it's long term investment approach.

 

The earnings in a year from that $11billion should it be parked in a low risk investment could have fed lots of poor family or sponsored many old people medical care.

[Atonchia]

 

You and me lor..

 

If I stop working, how are they going to take from me?

 

So there is something that will take from those who do not even work, thus no need to pay income tax.

Its called Goods and service tax, unless one is totally self sufficient, require no service or no goods.

[The_Bear]

 

If I stop working, how are they going to take from me?

 

So there is something that will take from those who do not even work, thus no need to pay income tax.

Its called Goods and service tax, unless one is totally self sufficient, require no service or no goods.

They will take from you even if you stop living.😪

[Hydrocarbon]

If I stop working, how are they going to take from me?

 

So there is something that will take from those who do not even work, thus no need to pay income tax.

Its called Goods and service tax, unless one is totally self sufficient, require no service or no goods.

 

Unless you move out of Singapore totally.. As long as you're here, whether working or not, you're paying for someone's gambling habit..

[Ben5266]

 

 

How are they going to do the top up?

ask us to work till 80 then retired.

Minimum sum $1mil.... fixed monthly payout for 40 years.

They will promise to pay us till we are 120....

Raise employer CPF?

Bingo... instead, they said they want to increase our CPF fund for our retirement.

Actual is... they need the cash now!

[Volvobrick]

The minister is right for once..... allowing them to take more risks would mean we start taking out our CPF at age 100....

 

.....in installments!

[Baal]

They will take from you even if you stop living.😪

u referring to HOTA ?