So the questions remain, just how 'healthy' is the Government of Singapore Investment Corp? And why does the lack of ransparency continue? The release of the '9.5%' figure has done little to undermine concerns, merely highlight the fact that the GICs lack transparency.
There are three types of lies...
July 11 (Bloomberg) --
The Government of Singapore Investment Corp., which manages more than $100 billion of the city-state's reserves, has earned an average 9.5 percent a year since its inception in 1981, Chairman Lee Kuan Yew said.
Lee, 82, said the annual rate of return on the foreign reserves managed by GIC averaged 9.5 percent in U.S. dollar terms, and 8.2 percent in Singapore dollar terms in the 25 years ended March 2006. It was the first time that GIC has publicly disclosed details on the performance of its investments.
``GIC has fulfilled its mandate of preserving the international purchasing power of our reserves,'' Lee said at an event marking the company's 25th anniversary. ``Indeed, the GIC has significantly enhanced the value of our savings.''
GIC has expanded in tandem with the island's economy through investments ranging from U.K. shopping malls to Malaysia's biggest automaker. Singapore's foreign reserves swelled to $128.9 billion in May to become the seventh largest in the world, from ``only a few billion dollars'' in 1970, according to GIC and data from the city-state's central bank.
GIC, which doesn't publish its financial statements, aims to achieve a rate of return exceeding the average inflation rate in the U.S., Japan and Germany, according to its Web site. Its average rate of return over global inflation was 5.3 percent per annum since 1981, Lee said.
China, South Korea
The company's success has prompted governments including South Korea and China to consider setting up their own investment firms to oversee foreign reserves that have surged to records. Korea Investment Corp., South Korea's state-run fund, began operations in July 2005 to manage $20 billion, part of the world's fourth-largest currency reserves.
``The fact that people are following Singapore's example shows that GIC has been quite successful,'' said David Cohen, director of Asian Economics Forecasting at Action Economics LLC in Singapore. ``GIC is a microcosm of the Singapore economy.''
Singapore, Southeast's Asia's fourth-largest economy with a population of 4.4 million, is the only country in Asia with triple-A ratings from Moody's Investors Service, Standard & Poor's and Fitch Ratings.
GIC plans to invest more in emerging markets including China, India, South Korea and Taiwan, the company's Managing Director for Public Markets, Ng Kok Song, told reporters at a separate event in Singapore today. GIC will also consider investing in Russia, Brazil, Mexico and South Africa, he said.
``As ever, the devil's in the detail,'' said Hugh Young, Singapore-based managing director at Aberdeen Asset Management Asia Ltd., which manages $27 billion in Asian assets. ``It depends on what you buy.''
The U.S. is home to as much as 45 percent of GIC's assets, Ng said today. Europe accounts for as much as 25 percent and Japan as much as 10 percent, GIC said.
GIC currently invests half its assets in equities and between 20 percent and 30 percent in bonds. About 20 percent is allocated to private equity, real estate, commodities and other investments, Deputy Chairman Tony Tan said. GIC lets institutional investors manage 25 percent of its funds.
The company will increase investment in hedge funds and commodities, Ng said. The company has invested in 50 hedge funds to date and started investing in commodities 2 1/2 years ago, he said. These include oil, metals and soft commodities, Ng said.
``We have invested in about 50 hedge funds and I'd say probably about 15 to 20 presently are included in the GIC portfolio,'' Ng told reporters. ``Asia hedge fund space is an important area for us. We are looking for more opportunities to invest there.''
The company's buyout arm, GIC Special Investments, has teamed up with Goldman Sachs Group Inc. and other partners to bid for Associated British Ports Holdings Plc.
GIC was part of a group led by Spain's Grupo Ferrovial SA that last month agreed to buy BAA Plc, the owner of London's Heathrow airport, for 10.1 billion pounds ($18.6 billion).
GIC Real Estate, one of the world's top 10 real estate companies, manages about a 10th of GIC's assets and benchmarks its return on ``government bonds plus several hundred basis points,'' Seek Ngee Huat, the unit's president, said in January.
Its assets include AT&T Corporate Center in Chicago, Shiodome City Center in Tokyo, Star Tower in Seoul, the IBM headquarters in Madrid and Chifley Tower in Sydney.
Lee, the founder of modern-day Singapore, has been GIC's chairman since the company was established in 1981. Ng has served since 1999 as managing director for the public markets.
Some investors have called on GIC to provide more information about its investments and returns. State-owned investment company Temasek Holdings Pte, which has stakes in companies including Bank of China, started publishing its financial results in 2004.
``Transparency is generally seen as beneficial to companies,'' Cohen said. ``It would be positive for GIC.''