SINGAPORE: In a recent revelation by Singaporean blogger, Philip Ang, claims have surfaced regarding Singapore’s sovereign wealth fund, GIC, suffering record losses in the fiscal year 2023.
This controversial statement juxtaposes the positive performance depicted in the mainstream media.
Mainstream Media vs. Blogger’s Perspective
While media outlets like Channel News Asia (CNA), Straits Times, and Mothership have reported positive performances by GIC in FY2023, Philip Ang suggests that such positive portrayals could be misleading.
- CNA reported, “GIC to grow infrastructure investments as 20-year annualised real return hits 8-year high.”
- Straits Times highlighted, “GIC posts resilient real returns above inflation rate.”
- Mothership mentioned, “GIC records annualised real return of 4.6%, its highest in 8 years.”
Ang raises concerns about the 20-year annualised real rate of return metric GIC uses.
“GIC uses the 20-year annualised real rate of return to measure its own performance. It’s the only fund manager/SWF in the universe to use such a metric.
The reason for this is simple; so long as GIC is profitable in most years, the mention of ‘loss’ in the media is avoided. To illustrate, if GIC makes consistent investment gains every year but is unprofitable in, say, 5 out of 20 years, on average it will still be making a profit.
Errr … why not increase the 20-year duration to, say, 25 or 30 years?”
He believes it can help mask losses and cited an example from FY2009 where GIC suffered a then-record loss of US41.6 billion but still reported a positive 20-year annualised rate of return of 4.4%.
Financial Movements in 2022
In 2022, significant transfers were made to GIC:
- S$75 billion was transferred from the Monetary Authority of Singapore (MAS) in April 2022.
- An earlier transfer of S$185 billion three months prior.
Ang noted that these investments, totalling over S$300 billion, were mostly in overvalued assets, making GIC vulnerable to losses.
Global Financial Scenario
Global markets faced turmoil in 2022:
- A series of 8 interest rate hikes from May 2022 to March 2023 by the US Federal Reserve, prompting other central banks to follow suit.
- Global stock and bond markets lost over US$30 trillion.
Ang estimated that with GIC being the 7th largest sovereign wealth fund globally, its share of this loss could be around US$69 billion, or approximately S$95 billion.
He pointed out that FY2023 was also a terrible year for GIC’s sister company Temasek with a shareholder return of -5.1%, its worst performance in 7 years and raised doubts over how GIC made ‘8-year high returns’ for the same period.
In contrast, Norway’s wealth fund @ The fund | Norges Bank Investment Management reported a loss of US$164 billion, suggesting transparency in their reporting, which Ang believes GIC lacks.
GIC’s Diverse Portfolio
GIC’s investment in various assets such as bonds, real estate, and private equities saw potential downturns:
- With rising bond rates, GIC’s significant bond holdings might have faced devaluation.
- Despite falling real estate prices in 2022, GIC invested a record US$20 billion in this sector.
On the brighter side, the Singapore dollar strengthened against many global currencies in FY2023, which might have offset some of GIC’s losses.
Ang’s assertions provide a contrasting view to the mainstream media’s portrayal of GIC’s performance in FY2023.
According to him, while all asset classes faced the brunt of rising interest rates, with the media’s alleged complicity, GIC’s potential losses may have been cleverly hidden from public view.