Tuesday, 29 September 2009

Singapore: GIC’s Turn Under the Microscope

The Government of Singapore's Investment Corporation (GIC) released its latest 'annual report' yesterday. As GIC manages the country's reserves, the results are of interest to all Singaporeans.

The Government of Singapore's Investment Corporation (GIC) yesterday released its results for its financial year ended March 31, 2009

GIC must be lauded for making voluntary disclosures of selective information. Certainly many analysts will be reviewing the information in the coming days and weeks and one can expect a fair degree of scrutiny.
However, here are some preliminary questions that come to my mind.
1.   Given that the information released is general in nature there is no reason why it should not be released (say) two months after the end of the financial year.
2.   Yes, the global markets suffered and GIC's portfolio will inevitably suffer too. Yet, there is no comparative information provided by either the GIC report or the Straits Times article. Comparative perfo to place the GIC performance in context;
3.   Comparative performance of the MSCI World Index will help to place the GIC returns in context and help to assess the performance of GIC investment managers;
4.   The wording of GIC's risk-return objectives raise similar concerns as with Temasek, i.e. what specifically is a 'reasonable rate of return above global inflation, with due regard for risks, over an investment horizon of 20 years.' A clearly defined investment objective is indispensable.
Certainly, one can appreciate the government's desire to put a positive spin on GIC's investment performance. Nonetheless, having taken the decision to disclose a basic level of information it is necessary that the information be at least minimally useful to the general public.
The story should not end with the revelation of a SGD 59 billion dollar loss during the financial year ended March 31, 2009. The performance must be further dissected based on publicly available facts and figures.

6 comments:

  1. Also have a look at this article: State media tries to cover up GIC’s gigantic S$109 billion loss in two years - http://www.temasekreview.com/2009/09/30/state-media-tries-to-cover-up-gics-gigantic-s109-billion-loss-in-two-years/

    ReplyDelete
  2. Hi Seelan,

    Thank you very much for visiting the site and the link to the article in the Temasek Review. GIC's loss is a little bit too big to be covered up!

    Having spent a good part of my career in money management, I believe comparative evaluations are more meaningful than the absolute loss. Unfortunately, the last 1.5 years have been horrendous to all savers, individual or institutional.

    Of course, an autopsy is the best way forward and the only way that can occur is if there is greater transparency from GIC and other sovereign wealth funds.

    Sovereign Wealth Funds are too large and influential in th international capital markets to be left completely alone. Look at what happened when the world left hedge funds unregulated.

    This is a story about which we will be hearing a lot more in the coming months and years ...

    I hope to hear from you again soon.

    Kind regards,

    Imran

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