GIC loss is estimated at roughly $33 billion

February 17, 2009
Singapore Democrats

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Costas Paris
Dow Jones

The Government of Singapore Investment Corp. saw an investment loss of around 50 billion Singapore dollars (US$33 billion) in 2008 as a result of tumbling asset prices around the world, two people familiar with the situation said.

“The loss on the investment portfolio last year is estimated at around S$45 billion to S$50 billion,” one of the people said. “But GIC has no thoughts to sell down any of its major investments. They’ll wait until they recover.”

A second person said GIC’s investment loss last year was “recently estimated to be similar to Temasek’s.”

Temasek Holdings Pte. Ltd., Singapore’s other sovereign wealth fund, saw its investment portfolio fall 31%, or S$58 billion, to S$127 billion in the eight-month period ended Nov. 30, Senior Minister of State for Finance Lim Hwee Hua said last week.

GIC spokeswoman Jennifer Lewis said the sovereign wealth fund won’t comment on individual investments.

GIC, whose portfolio is more than US$200 billion even after the losses, has invested heavily in distressed financial institutions Citigroup Inc. and UBS AG, expecting that in the long term the two banks would provide substantial returns.

In January 2008, it invested US$6.88 billion in convertible preferred securities of Citigroup, which at the time would have given it a 4% stake in the bank if converted to common stock.

According to a U.S. Securities and Exchange Commission filing in late January, GIC owns a beneficial 5.3% stake, or 303.8 million shares, in Citigroup. These include preferred shares that can be converted into 261.1 million common shares. Based on Citi’s US$3.49 last closing price Friday, the stake is worth US$1.06 billion.

Beneficial ownership entitles GIC to all the benefits of Citigroup stock, such as dividends, rights and proceeds from a sale, regardless of whether it is the registered owner.

In December 2007, GIC invested 11 billion Swiss francs (US$9.47 billion) in UBS mandatory convertible notes for a 9% stake in the Swiss bank. Since then UBS’ shares have fallen around 75%.

According to a July SEC filling, GIC owned 7.9% or 240.2 million shares of UBS. The stake includes 228.8 million common shares that would result from the conversion of the notes.

Based on the 12.88 Swiss franc closing price Monday, that stake, if current, would be valued at 3.1 billion Swiss francs.

“Right now, these investments look very unfortunate but SWFs have the luxury of looking at the very long term,” the second person said.

GIC, which manages Singapore’s foreign-exchange reserves, has 34% of its portfolio invested in the U.S., 35% in Europe and 23% in Asia, according to its web site. Equities make up 44% of the portfolio, bonds 26% and real estate, private equity and venture capital 23%.

The first person said that, despite falling asset prices globally, GIC has no plans for a major investment anytime soon. “Apart from some investments in real estate not much is going on. They want to see the bottom first and there is no indication we are close to this point.”