Government must disclose billions in CPF/GIC foreign exchange losses and market value of investments

It has taken decades but the government has recently confirmed CPF monies are managed by GIC. “As GIC primarily invests outside of Singapore”, CPF monies are therefore subject to foreign exchange (forex) movements which are beyond GIC’s control.

The Singapore currency has been appreciating against almost all currencies during the last decade. As such, there are billions in unrealised forex losses. The government has tried very hard to prevent its disclosure.

The PAP government would of course insists this is merely speculation. Why then doesn’t it quash the speculation with transparency at GIC? The answer is ‘it cannot’ because transparency will prove the above is not speculation!

Instead, we have ‘clarifications’ by Minister Tan Chuan JinLim Swee SayDPM TharmanMP Hri Kumar, etc which are mostly general statements unsupported by relevant facts. The mainstream media, as usual, has been roped in to help sell snake oil to a well educated and sceptical public. The number of frustrated and shortchanged CPF members has been increasing.

Government must cease misleading CPF members

The government must not continue to mislead CPF members by emphasising our “CPF funds are invested in risk free SSGS” because it knows the ultimate destination is GIC which invests overseas. The geographical distribution of CPF monies is shown below. CPF funds are not risk-free.

GIC undertakes huge forex risks

The returns from overseas investments may be higher but there are also huge forex risks. Singapore’s ‘phenomenal’ growth during the last decade is a double-edged sword – our returns have been affected by our strengthening currency.

Since 2004, the US dollar has fallen $1.7 to $1.25 (about 26%),

the Malaysian Ringgit from $0.45 to $0.39 (about 14%) and

the Euro from $2.1 to $1.7 (20%) against the Singapore dollar.

You can view historical exchange rate of other currencies @ link

But GIC refuses to disclose huge forex losses

Since almost every currency has fallen against the Singapore dollar, there are clearly huge forex losses in GIC’s investments. Assuming the Singapore dollar has appreciated 15% on average against other currencies, S$100 billion invested overseas would be worth only S$87 billion from a decade ago.

Government prevents disclosure of forex losses

GIC could have easily disclosed its nominal returns in Singapore dollar. After all, CPF members will eventually withdraw in the local currency.

Instead, “the Client (government) instructed GIC to disclose nominal returns only in US$ in the GIC Report”. The government’s explanation is “This is to avoid confusion by the readers of the report to compare GIC’s returns in Singapore dollars with the returns of global market indices in US dollars”. This is another half-truth.

The “Client (government)” comprises political leaders and these same politicians are GIC directors.

Can the government (political leaders) instruct themselves not to disclose nominal returns in the local currency?

The government could have provided both figures – one in US$ and the other in S$. Why does it choose to use the avoidance of confusion as an excuse not to do so? Because the depreciation of the foreign currency lowers the nominal returns in the local currency. (see table below)

  US$ S$ US$/S$ RATE
INVESTMENT 100 150 1.5

Investments must be marked to market

Mark to market accounting is the gold standard for preparing financial statements. It reflects the current/fair value of an investment eg GIC bought UBS shares at 47.7 CHF (converted from UBS notes after earning CHF 2 billion from coupon rate) and the fair/current value should be about 17 CHF. The mark-to-market value shows the investment is only worth 35% of its original value. (17 CHF divide by 47.7 CHF) Even after taking into account the coupon rate gain of CHF 2 billion, the UBS investment is still sitting on paper losses of about CHF 5 billion.

GIC sent to ICU by UBS investment

GIC’s performance is not as stellar as made out to be by the government. In fact, it appears to bepunting with CPF monies and has been simplistic and even reckless! In 2007 when GIC invested in UBS notes with a coupon rate of 9%, it ignored the unfolding US subprime mortgage crisisand sank S$13.75 billion (CHF 11 billion, exchange rate about 1.25) of CPF monies into UBS. Why should the world’s largest manager of private wealth pay a 9% coupon rate? UBS appears to be having the last laugh.

In 2007, total CPF members’ balance was $137 billion. (chart below) A prudent fund managerwould not have sunk 10% of total funds into a single investment. GIC was totally reckless. The board of directors should have been held accountable.

CPF in trouble, needs more funds to generate revenue

The problem does not stop at UBS’ paper loss. UBS dividend in FY 2013 was CHF 0.25, the highest since 2007. At this dividend rate, GIC will only be able to recover its entire investment in…about 156 years. Including opportunity costs, the right thing to do is fire those who approved the investment.

GIC has committed about S$11 billion in UBS to earn a dividend rate of less than 0.01 %! (CHF 2 billion (S$2.5 billion) gain taken into account) Why must fund managers be paid millions for such returns?

Question: Will the government come clean and just tell CPF members how many ‘UBS type’ investments are GIC holding?

GIC thought it made a killing but got CPF members ‘killed’

The objective in the UBS investment mirrors the shortcuts used by the PAP government. The UBS notes paid a 9% coupon rate and by paying CPF members only 2.5% to 4%, the government thought it could easily pocket the difference. The government should have known there is no free lunch. Despite historically low interest rates, UBS has managed to see only darkness at the end of the tunnel.

CPF members’ S$11 billion in UBS is effectively earning next to nothing. There are likely to be other ‘UBS type’ investments unless the government confirms otherwise. More CPF monies will be legislated into GICCPF members are now paying the price for GIC’s failure.


That there are billions in forex (paper) losses in GIC’s investments is not speculation but common sense. The government should not continue to prevent its disclosure.

Minister in the PMO Lim Swee Say recently confirmed “many investments had been lost during the global financial crisis”. If GIC was a long term investor, it should not have panicked during the financial crisis and incurred billions in losses for CPF members. The UBS investment has shown GIC to be reckless with CPF monies. GIC now requires even more money from CPF members.

The government is not serving CPF members’ interests by withholding information which should have been in the public domain ie accounts of GIC. Transparency demands the government come clean bymarking to market the values of ALL CPF members’ investments. These investments do not belong to GIC. Members have the right to this information.

‘Clarifications’ with general statements by ministers and MPs will not be accepted by an increasing number of frustrated and shortchanged CPF members.

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