Lift GIC’s cloud of opacity
Isn’t it time we know how large Singapore’s largest sovereign wealth fund is and how well it really did?
The Government of Singapore Investment Corporation’s (GIC) disclosure policy is akin to that of an Indian dancer at a nightclub who swivels and shakes her body a lot, and smiles a lot but reveals little.
So it was not much of a surprise that little came out of Monday’s briefing by our largest sovereign wealth fund.
Yes, we were told that as at end-March this year, the 20-year nominal average rate of return annually was 7.1 per cent in US-dollar terms, and the real rate of return, above global inflation, was 3.8 per cent during the same period.
It was also disclosed that we are keeping the 6.4-per-cent stake in Switzerland’s largest bank, UBS, and our 3.8-per-cent holdings in Citigroup, as they have both weathered the recent global financial crisis and returned to profitability. And, like most of GIC’s investments, they are for the long term.
Group chief investment officer Ng Kok Song also disclosed that more emphasis will be placed on emerging market economies and that its funds allocation for equities to that sector will be raised from the current 10 per cent to 15 per cent.
But how well did we really do compared with last year and over what size of assets? How much did we really make? Those kinds of information are still under wraps. The printed GIC report, apart from policy statements and key staffing, provided little by way of GIC’s portfolio except for some general figures on fund allocation.
Despite numerous calls for greater transparency, including from Members of Parliament from the ruling People’s Action Party, the GIC continues to provide an opaque picture of itself.
And while we were previously given results in both US dollar and Singapore dollar terms, now only the former figure is given as the US dollar is more widely used in international indices and makes comparison easier, explained GIC’s deputy chairman and executive director Tony Tan with his usual grin.
Can we not have both figures to do our own comparisons?
Dr Tan also felt that, for now, what GIC disclosed was adequate and the corporation had no problems with the countries where it invested.
However, the Sovereign Wealth Fund Institute (SWFI) awards the GIC, established in 1981, a “6” rating for transparency while giving Norway’s Global Pension Fund, which looks after some US$471 billion ($622 billion) in assets, the maximum “10” rating.
The US-based SWFI continues to surprise critics of Temasek Holdings by giving the island’s second SWF a perfect score. But then, the Temasek Report does provide its portfolio size and annual quantitative performance figures.
GIC’s reticence means that we will never know for sure if the US$247.5 billion figure that the SWFI says the Singapore sovereign wealth fund manages is accurate, making it therefore indeed the world’s sixth largest SWF.
So, why can’t the GIC match Temasek in its disclosure policy? Or will it resort to saying that Temasek, because it has started issuing bonds, has no choice but to show greater transparency?
Finance Minister Tharman Shanmugaratnam once explained that the Government decided not “to go for full transparency but to insulate this process of determining long-term expected rates from political pressures or the mood of the day”.
He said that this approach, which “relies on us having the right people in charge and robust checks and balances within the system” has “a dispute resolution mechanism that says fall back on the last 20 years of historical returns if there is disagreement”.
But what happened to the Santiago Principles to which he also gave support?
It was stated a couple of years ago in an open editorial co-written by Mr Shanmugaratnam, then US Secretary of the Treasury Henry M Paulson and Abu Dhabi’s Under-Secretary of Finance Hamad Al Hurr Al-Suwaidi.
They wrote: “Demonstrated accountability and enhanced transparency among both SWFs and recipient countries (where the money is invested), as outlined in the Principles (Santiago), will support global financial stability. The SWF’s adoption of the Principles will reinforce confidence in their roles as constructive partners in global markets, making investment decisions subject only to economic and financial considerations.”
Perhaps it time to stop teasing the public and provide a clearer picture of the way our SWFs perform.
The writer is Today’s editor-at-large.