: I was following the posts on a forum on how GIC lost US$2.3 billion in UBS and thought some of the points were really interesting. There are two groups of people heavily debating on the topic and as expected in every investment, there are the Group A — Risk Takers, and Group B — Conservative Keepers. GIC or not, these two groups of discussion basically represented the typical.
Some people are saying how GIC should avoid investments all together in this crisis but Warren Buffett, the world’s greatest investor thinks otherwise. He says crisis creates opportunities (Check out all his interviews on YouTube). Theoretically, I highly agree. Not in financial terms but in life. I love crises, it always makes me grow. As all speculators will agree, the most boring market (life) is the stagnant one. I’m not very well-versed in financial investments, so I can’t really comment if the GIC-UBS loss was a justified one or not. But being a moderate risk-taker, I recognize there are no sure-win investments. No amount of foresight can avoid the closure of Lehman Brothers or an economic meltdown. If there were such folks, we wouldn’t be sitting on fire and waiting for the next economy crisis right now. USA and Europe, the countries with some of the best brains in the world, wouldn’t be facing such economic perils (Obama will get his black hair back). So I’m convinced there are risks to all investments.
As for the transparency issue, I understand that GIC has its annual reports available publicly that records its rate of returns in the past 20 years. From previous news reports (http://uk.reuters.com/article/2011/07/25/gic-idUKL3E7IP3DK20110725 and http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1143034/1/.html), it seems that GIC remained in the green with an ROI of 7.2% in the past 5 years despite some unforeseen losses. As for how much detail of these investments should be revealed to the public outside the President’s Office…
Well, I honestly have not developed a point of view for it. Because I wonder how much of those detail will I be able to understand, or will it open another avenue for confusion and multitude of varied interpretations. Sometimes, being simple and clear with the immediate result is more straightforward. Ask any boss, no one really wants to know the exact calculation and formula processes of the nitty gritty. Like Jack Welch believes, always hire the experts to do the job. It’s impossible to know and understand everything (maybe it’s just me). Explain the concept, the execution and the returns, simple. That’s what I tell my accountant; explain which formula is better, why it’s better and how to make it better. Finally, I’ll sign. That’s my job.
So maybe, less is more? Let’s hope the new President will be a fair one to keep his eye on this.
Here are some points that we have gathered from official sources:
GIC needs to invest in order to preserve and enhance the value of Singapore’s national reserves. According to its FAQ, it manages risk by diversifying investments. Since all investments carry risks, there will always be good investments and bad investments; the important things is to have a net gain over time. If we look at its overall performance, GIC has made a decent net gain over time according to its published report.
On the question of how transparent GIC should be on its investments, GIC’s position is that revealing too much detail is against the national interest, as the Singapore dollar will become more susceptible to attacks by speculators during periods of vulnerability.
The GIC answers to its Board of Directors as well as the President. It also publishes reports on its long-term performance and returns.