Don’t judge wealth funds on bailouts: Singapore PM

The China Post

The performance of Singapore’s sovereign wealth funds should not be judged solely on their recent bailouts of troubled global financial institutions, Prime Minister Lee Hsien Loong said Friday.

Late last year and early this year the Government of Singapore Investment Corp (GIC) injected billions of dollars into Swiss bank UBS as well as U.S. banking giant Citigroup. Meanwhile, the city-state’s Temasek Holdings pumped billions into the former U.S. investment bank Merrill Lynch.

“The situation looks a lot gloomier now than when they went in, but these are long-term investments so we will see. It looks under water now, but the situation can change,” Lee told the Foreign Correspondents’ Association of Singapore.

All three financial institutions suffered massive losses from U.S. subprime, or higher-risk, mortgage investments and their positions worsened this year.

Bank of America announced in September that it was buying Merrill Lynch as fears rose over whether the firm would survive.

In October, Switzerland pumped US$60 billion into UBS and the following month the U.S. government stepped in to guarantee potential losses at Citigroup and put in a further US$20 billion.

“In a year in which things have turned out a lot worse than expected across the board, long-term investors must expect to see negative returns, at the very least,” Lee said.

He declined to comment on individual investments by GIC and Temasek but he said the two firms invested in the overseas financial institutions “as long-term opportunities assessing the risks at the time”.

He said GIC and Temasek should be assessed not on individual projects but on the overall long-term performance of their diversified portfolios.

GIC, one of the world’s largest sovereign wealth funds, in September said its nominal rate of return over the past 20 years was 7.8 percent in U.S. dollar terms.

It said it managed well over US$100 billion in investments.

Temasek, which has stakes in well-known regional firms including Singapore Airlines, in August reported a record annual profit of S$18.2 billion (US$11.9 billion).