VZCZCXRO6649
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGP #0951 2720807
ZNR UUUUU ZZH
R 290807Z SEP 09
FM AMEMBASSY SINGAPORE
TO RUEHC/SECSTATE WASHDC 7265
INFO RUCPDOC/USDOC WASHDC
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SINGAPORE 000951 
 
STATE PASS USTR 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EINV SN
 
SUBJECT:  SINGAPORE SOVEREIGN WEALTH FUND SHOWS SHARP LOSSES 
 
REF: 08 SINGAPORE 1059 
 
¶1.  Summary:  Singapore's largest sovereign wealth fund lost 20 
percent of its value in the last financial year ending in March, but 
has since made up much of the losses in the ensuing recovery in 
financial markets.  In only its second annual report in its history, 
the Government of Singapore Investment Corporation (GIC) detailed 
changes in its asset mix toward alternative investments like natural 
resources and private equity, and plans to expand holdings in 
emerging markets.  The United States is still GIC's largest 
destination for investments, though it recently divested half its 
multi-billion dollar investment in U.S. bank Citigroup.  End 
Summary. 
 
GIC Down, But On the Rebound 
---------------------------- 
 
¶2.  On September 28 GIC released its annual report, the second in 
its 28-year history after issuing its first report in 2008, 
disclosing an annual loss of 20 percent in its portfolio in the 
financial year ending March 31.  GIC said it had sought to diversify 
its portfolio in recent years by broadening its asset holdings into 
private equity and real estate, but nevertheless suffered 
substantially in the global fall in stock markets and other assets. 
A reduction in public equity holdings in 2008 prior to the crash 
helped ease some of the losses.  With the year's losses, GIC 
reported that the fund's average real (inflation adjusted) rate of 
return over the past twenty years fell from 4.5% to 2.6%.  However, 
GIC noted that with the recovery in global markets since the end of 
March the portfolio has recovered more than half its losses. 
 
¶3.  GIC is the largest of Singapore's two sovereign wealth funds, 
tasked with investing a portion of the country's foreign reserves 
overseas.  Although GIC discloses only that it manages in excess of 
US$100 billion in assets, estimates of its value have ranged as high 
as US$400 billion.  A September 28 Wall Street Journal article 
quoted a source that GIC's portfolio currently stands at 
approximately US$188 billion. 
 
Back into Equities 
------------------ 
 
¶4.  GIC's report said that although the fund reduced its equity 
holdings from 44 to 38 percent during the last financial year, it 
has since returned its stakes in public equities to pre-crisis 
levels.  Alternative investments like real estate, private equity 
and natural resources increased from 23 percent to 30 percent of 
holdings.  GIC also increased its cash holdings from seven to eight 
percent despite earlier speculation the fund would take advantage of 
the financial crisis and use its cash hoard to pick up distressed 
assets on the cheap (reftel). 
 
U.S. still tops for investments 
------------------------------- 
 
¶5.  The United States continues to be the destination for the 
highest percentage of GIC assets, with 38 percent of total assets 
compared to 34 percent in 2008.  Its Europe holdings dropped from 35 
to 29 percent while its exposure to Asia increased only slightly to 
24 percent.  GIC's report said the changes in investment 
destinations resulted solely from a selection of new investment 
opportunities rather than a concerted strategy of targeting 
geographical regions.  Nevertheless, GIC Chief Investment Officer Ng 
Kok Song told a press conference that GIC's investments in emerging 
markets would likely increase as the fund expected global economic 
growth to be higher in emerging rather than developed markets. 
 
¶6.  GIC shed half its holdings of U.S.-based Citigroup earlier in 
September, realizing a US$1.6 billion gain.  Its original US$6.88 
billion investment in Citi early in 2008 had come under criticism 
after a sharp fall in the stock's value, but built-in downside 
protections in its preferred shares saved the fund from losses.  GIC 
retains a 4.9 percent stake in the bank.  GIC's 2008 investments in 
Swiss bank UBS have been less lucky with its nearly US$11 billion 
purchase still down by nearly half. 
 
SHIELDS