Singapore GIC chief’s warning proves prophetic
Despite his July forecast of a recession coming true, Tony Tan still sees opportunities for fund
Dr Tan’s team is shopping for distressed assets in the US to boost long-term returns for the fund. — ST PHOTO: CAROLINE CHIA
WHEN Dr Tony Tan, executive director of Singapore’s biggest sovereign wealth fund, warned in July that the world might plunge into its worst recession in 30 years, many shrugged off his remarks as too gloomy.
Three months later, Dr Tan’s prophecy of doom is becoming a reality as the credit crisis ravages US and European banks and takes a toll on the global economy.
Dr Tan’s Government of Singapore Investment Corp (GIC) is meanwhile sitting with 7 per cent of its estimated US$300 billion (S$435 billion) portfolio in cash and another 26 per cent in G-7 government bonds.
Dr Tan, a 68-year-old former finance minister, professor and banker, and his team are now cautiously sifting through the financial carnage to shop for distressed assets in the United States in an effort to boost long-term returns for the fund.
GIC released its first performance report last month, after increased scrutiny of sovereign funds by Western lawmakers who want them to be more transparent, and revealed a 4.5 per cent real return in Singapore dollar terms over 20 years.
‘We should not assume that the worst is over and we continue to be watchful and prudent in our assessment of the economic risks and in our investments,’ Dr Tan, who is also the fund’s deputy chairman, told reporters at the launch of the report.
Mr Song Seng Wun, a Singapore-based economist with Malaysia’s CIMB, said Dr Tan’s long stint with the private and public sectors made him experienced enough to guide GIC through the crisis.
‘I don’t think you can compare him to an investor like Warren Buffett,’ he said. ‘But he is an old hand who has seen the ups and downs of the Singapore economy and it is good to have someone like him steering the ship.’
GIC, which manages part of Singapore’s foreign reserves, ploughed US$18 billion into UBS and Citigroup in December and January, though shares of the two banks have since fallen. By contrast, Mr Buffett, regarded as one of the world’s greatest investors, waited until the past two weeks to spend US$8 billion on shares in Goldman Sachs and General Electric.
Dr Tan has said US investments will remain a big part of his portfolio, but GIC has said it may use some of its cash to buy emerging market stocks in Asia.
Dr Tan joined GIC in 2005 after a stint as the chief executive officer of Singapore lender Oversea-Chinese Banking Corp and over a decade in politics, which followed a PhD in applied mathematics.
Dr Tan, who has his hair slicked back and wears vintage dark-rimmed glasses, became finance minister and was tipped by Singapore’s first prime minister Lee Kuan Yew as his successor. The post eventually went to Mr Goh Chok Tong in 1990.
‘He has a quick brain and there is a decisive quality about him. He listens, takes all points of view and decides,’ Mr Lee said of Dr Tan in 1988. Mr Lee is the chairman of GIC but leaves its day-to-day running to Dr Tan.
GIC has limited its losses on UBS and Citi by taking advantage of price reset clauses in its original agreements. Dr Tan has said GIC has room for investing in another bank.
‘We always look at the risk first,’ Dr Tan said in January. ‘Our philosophy is if you look after the downside, the upside will look after itself.’
REUTERS
Source : Straits Times - 06 Oct 2008
Singapore Property - Buy, Sell, Rent, Invest
Mindy Yong
(+65)91002985
mindy@mindyyong.com ( email me )
Kovan Melody @ Kovan Road For Sale »« Blossoms @ 12 Woodleigh Close For Sale
