Overthinking It, What's going on?

GIC sold UBS shares at a loss. Should we be worried?

So, according to press reporting, Singapore sovereign wealth fund GIC has reduced it’s stake in Swiss global financial services company UBS at a loss.

GIC announced it had reduced its stake in UBS from 5.1% to 2.7%, but did not reveal the extent of the loss. GIC had bought the UBS stocks during the 08/09 global financial crisis (also known as the Lehman Brothers Lelong Sale), along with investments in US bank Citigroup.

However, GIC did clarify that the combined returns for both the UBS and Citi investments was a net positive.

Nonetheless, GIC’s announcement has sparked off some fears among Singaporeans, and naysayers have talked about all doom and gloom.

But really, should we be worried?

The answer is, no. And here’s why:

1. Look at the overall investment returns

No fund manager gets his calls 100% right. Actually, not even 50% for most. Those in the industry would know.

The thing is, some stocks will do well and some stocks won’t. That’s part and parcel of investments. It is perfectly normal, and also the right thing to do, to cut losses and divert your resources to other potentially good investments.

No risk, no gain.

The key thing is that the portfolio, as whole, should do well. Which has been the case for GIC.

GIC’s overall real returns over the past 20 years, including the 08/09 Global Financial Crisis, is about 4%. That’s very decent.

Also, the UBS + Citigroup investments have been a net positive. So that’s actually good news.

2. Increase in Net Investments Return (NIR) since 2009

NIR refers to the returns in the net assets managed by GIC and MAS. NIR has been factored into Singapore’s annual Budget since 2009.

Every year since NIR has been included for Budget, contribution from investments have gone up – from around 7 billion in 2008, to 9 billion 2015. (And that’s before the addition of Temasek’s investment returns.)

And because of the NIR returns, we have been able to balance the books without the need for increase in taxes.

If GIC is doing badly, which it clearly isn’t, how is it that the NIR can go up every year?


So, all doom and gloom? Think again.

That is all.

The end.


1 Comment

  1. Sherman ong

    If that is the intellect or case then let us play our own games. Why should we let you game us?
    70% look stupid.

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