11 Jul 2006

Singapore's Lee Says GIC Has Earned Average 9.5% Over 25 Years

I am not an economist but wouldn't the figure which takes inflation into consideration make more sense? And simply announcing an average that runs over 25 years really means very little when we can't look at the yearly figures, investments, losses and gains.

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.

Equities, Bonds

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.

BAA Buyout

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.''


Anonymous said...

Er.. maybe he meant the interest earned from his bank accounts? haha

Matilah_Singapura said...

A coupl of independent audits should clear up any wild-speculations and give us all the objective truth.

Any chance of that happening?

Mr Chairman, are you going to open the books so that those devilish details can be scrutinised?

Anonymous said...

Frankly speaking, I believe most Singaporeans do not even know that the GIC uses our money to invest. They don't even care.

What the Average Typical Singaporean really want to hear is positive news! News that the govt had used our money and invested wisely and made money! (I didnt know there is such a thing as no-risk, guaranteed return investment), news that employment rate is lowest in a decade, news that actually economical growth is higher than expected. And the A.T.S are too busy to verify whether all this are true becuz the A.T.S believe religously that their mainstream media has always report nothing but the truth.

Anonymous said...

actually, they want GIC to distribute profits to the people, but I doubt that's going to happen

controlling large sums of money is what makes the people bigshots; they would not want to decrease their control

Matilah_Singapura said...

to anon 1: Govt securitites are classed "no risk" because the govt can always TAX us to pay up. It takes with one hand to pay its obligations held by the other hand.

And you are correct: most people are "rationally ignorant". We all have the same 24 hrs in a day to "get shit done". The average Jo and Jane spend 2 hrs commuting to and fro from work, 8-10 hrs at work, sleep 8 hrs which leaves them 4-6 hrs to "get the other shit done". Who gives a shit at what govt is doing? As long as the place doesn't collapse, everything's OK.

"Freedom" requires eternal vigilance. Most people prefer leisure activities instead.

to anon 2: The GIC profits won't be distributed in any significant way. The GIC fund manages the RESERVES.

In s'pore, a significant amount of the wealth is held by the state. Take Oz, for e.g.—20 million people, vibrant economy. Oz's reserves are a mere $39 billion—only a fraction of what S'pore's reserves are.


Because most of the wealth is held privately.

One fundamental of liberty which people avoid is this: "There can be no liberty without economic liberty". The simple reason for that is because money is merely a medium of exchange. Thus the more you have, the more "choices" you have to insulate yourself from the vagaries of life, political and state interference.

The GIC will continue to hold on and increase its wealth. That boosts the already frightening amount of govt power.

Why should they give up the base of their power? Because it is "moral" or "ethical"?

Don't kid yourself! :-)

Anonymous said...

Maybe,Lky,in one of his rarest moments of generosity, will declare that the interest earned be distributed to the general populance.

Anonymous said...

what matters most to me is for GIC to be transparent and to show us the books they manage.

Anonymous said...

then we can KNOW whether what old man and his papsmear say is TRUE!

Anonymous said...

Lies, damn lies and statistics.

atohlk said...

I think we are in an age that is beyond just knowing that the lead man can take care of things. We now, need to know the lead man, how he runs the firm, what he does and ask the question: "what is next?" instead of just knowing that, at the end of the day there is only positive results. Its rather sad to know that our public insitiutions and local companies are rather out dated as compared to the outside world. If this continues, how can we truly say, we are world class material when other leading insitiutions are becoming more transparent. I guess, things appear different when your on top.