20 May 2008

Long term investments or long shots?

Singapore's sovereign wealth fund, the GIC, invests for the very long term, but the news in the short term can be quite unnerving. On Citigroup and the Old Lane hedge fund, and on Shincorp. Full essay.

7 comments:

Alan Wong said...

If I myself made any losses in my own investment, I always find some excuse to comfort myself.

What else can we expect old LKY to say, other than it's for the long term? It is not easy to admit making losses over public funds especially when it appears that all the highest decision-making is made by the members of his own family.

If I remembered correctly, some GIC/Temasek investments were sold off within a year or so. How come they never explained that the investments are meant to be held for the longer term? It only goes to show valid excuses can be offered at any time to explain embarassing political situations. Afterall, it does't cost a dime to come up with empty talk.

A loss is a loss. Do they ever have the word "accountablility" in their dictionaly? It's just very sad that the very same group of people are still making the decisions.

Anonymous said...

If one group owns almost all, whatever ratios are useless I would think..... Like the old man said... think Long Term... very long term....

Anonymous said...

recently Carl Icahn bought Yahoo, and Warren Buffett bought Wrigley; neither bought bank shares, meaning they think these are not the most attractive investments now, and they are not swayed by the prestige of being Citicorp/Merryl Lynch shareholders

on the other hand, if the banks could get Icahn/Buffett to invest in them, they wont be coming all the way to Asia to look for buyers

sgsociety.com

Anonymous said...

Here is another so-called "Long term" GIC investments, which seemed to have escape the news.

BAA the owner of the troubled T5 in Heathrow, London, UK is currently owned by a consortium known as Airport Development and Investment (ADI). The consortium in term is represented by:

"Ferrovial owns 61pc of ADI. Canadian pension fund, Caisse de dépôt et placement du Québec, holds 29pc and the Singapore-backed investment company GIC, 10pc."[1]

According to theDaily Telegraph dated 10/5/2008:

"BAA'S three shareholders have been forced to inject £400m of fresh funds to get the much-delayed £10bn refinancing of the airport operator off the ground."

So another headache for GIC or a potential gold mine?

It is worth noting that BAA is quite a troublesome beast[2].



Note [1]: Daily Telegraph
[2]: The Economist

Anonymous said...

Yawningbread:

More information on GIC involvement in ADI/BAA:

Airport Development and Investment Limited, a consortium led by Grupo
Ferrovial, took control of BAA on 26 June 2006.

The full membership of the BAA plc Board is as follows: Marcus Agius, Chairman;
Stephen Nelson, Chief Executive; Tony Douglas, CEO Heathrow; Margaret Ewing,
Chief Finance Officer; Luis Sánchez Salmerón, Deputy Chief Executive; Juan
Bejar, CEO Ferrovial Infraestructuras; Joaquín Ayuso García, CEO of Grupo
Ferrovial S.A; Nicolás Villén Jimenez , CFO Grupo Ferrovial S.A; José María
Pérez Tremps, a director and legal counsel of Grupo Ferrovial S.A; Lucas Osorio
Iturmendi, legal counsel of Ferrovial Infraestructuras S.A; Ghislain Gauthier,
Senior Vice President, Investment, Infrastructure and Energy, CDP Capital;
Macky Tall, Investment Manager, Infrastructure and Services, CDP Capital;
Robert Coté, Vice President, CDP Capital; and Aug Eng Seng, Head of GIC
Government of Singapore Investment Corporation.

The full membership of the BAA Executive Committee is as follows: Stephen
Nelson, Chief Executive; Margaret Ewing, Chief Finance Officer; Tony Douglas;
CEO Heathrow; Luis Sánchez Salmerón, Executive Director; Mick Temple,
Divisional Director; Tony Ward, Services Director; Mike Toms, Planning and
Regulatory Affairs Director; Donal Dowds, Divisional Director; Duncan Garrood,
Divisional Director; Peter Blausten, Human Resources Director and Ian
Hargreaves, Corporate and Public Affairs Director. As announced in October 2005
Mike Toms will retire from BAA in October. From September 1, his
responsibilities for regulation will be assumed by Ian Hargreaves, who becomes
Corporate and Regulatory Affairs Director.

Andrew Jurenko, Chairman, BAA Lynton&Managing Director, BAA International,
will, by prior agreement, shortly retire. He steps down from the Executive
Committee on 1 September 2006.
[1]

Note [1]: BAA PLC: Directorate Change

Yawning Bread Sampler said...

I think we need to be careful not to expect that none of GIC's or Temasek's investments will go wrong. Some will. It is in the nature of making investments. What may be going wrong now may turn out all right later too.

The better question is what benchmark do we consider "right"? and in what time frame?

I notice that the govt has been very coy about this.

Also, given the size of Singapore's sovereign wealth funds, we will often find ourselves with stakes in companies large enough to make the news, such as BAA. In itself, this should not be a cause for concern.

Anonymous said...

Sovereign governments should not invest taxpayers' money into public listed shares or direct equity investments. Economic theory or rather, economic history have proven time after time that governments often misallocate public money into wrong investments or blow the money into deep holes with no prospect of getting it back. Case in mind: Micropolis Corp(Hard Disk Drive manufacturer acquired in 1996) which costs Temasek $340M in liquidation costs)
The fact that GIC & Temasek are non transparent investment entities are a source of concern for all Singaporeans contributing to CPF & taxes.
The problem lies with the Old Man who thinks that he can circumvent economic history by championing public sector investments over the private sector ones. The collapse of the Eastern Bloc a decade ago does not alter his thinking. His problem is his naivety in today's investment world. He is shoveling our public money into yesteryear's investment ideas like global banks and telcos. Global banks have become like land mines where a wrong step can blow you away. Witness the banking catastrophe like Barings, SocGen where one man's action can devastate the entire bank. UBS CEO in a recent press statement admitted his inability to quantify the bank losses in the subprime debacle. If he couldn't understand his bank's subprime investments - how can the old man understand?
Telcos are another problem where Spore has investments in wrong areas - rapid technology is tearing up the old world telcos. VOIP and Broadband technology is eroding voice & data transmission margins for telcos. Spore plunged into telcos like Shin Corp, Telkom, Optus while their shareholders exited at the peak.
Decades of censorship and rigid control have sapped the energy & ideas from individuals & society. The system has created a extremely dull & conformist one. When one compares the entreprenuerial energy that is evident in the US and the lacklustre one in Spore - you can see that our minds as well as that of our leaders have been dulled by shutting out external stimuli using the pretext of safety & control. When gay issues have long been accepted by societies elsewhere as part of diversity - why is the Spore govt still debating such issues? I don't think the people have much opposition against gay people. The bar-top dancing issue is another case in point. Highlighted in year 2000 film Coyote Ugly - it was not until Aug 1,2003 that Spore after much debate by Spore ministers that the ban was reluctantly lifted. One minister even commented that the ban had to be enforced to prevent party revellers from hurting themselves if they fell from the bar-top. What a joke! It took almost 3 years to lift the bar-top dancing ban by which time the film Coyote Ugly had already faded from people's minds. The time it took to get the bureaucrats to make the decision contrived to make the fresh nightclub trend looked like a faded Patpong club attraction - crass and crude.
Whose fault is it?