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'Judge GIC on its long-term returns'

Long-term horizon lets it take advantage of investment opportunities, said ex-CIO. -ST
Lee Su Shyan, Money Editor

Tue, Feb 26, 2013
The Sunday Times

GIC veteran, Mr Lim Chow Kiat (left), has succeeded Mr Ng Kok Song (right) as Chief investment officer. Mr Ng remains as an adviser to GIC.

SINGAPORE - With more than US$100 billion (S$125 billion) of funds, the Government of Singapore Investment Corporation (GIC) is one of the largest sovereign wealth funds in the world, and is highly regarded internationally for its professionalism.

Chief investment officer Ng Kok Song, 64, stepped down on Feb 1, after 27 years of managing Singapore's foreign reserves.

He steered GIC through financial booms and busts, including the October 1987 Black Monday stock market crash, the Asian financial crisis, the bubble and the recent global financial crisis.

But GIC has attracted criticism at home for various reasons, including not giving enough details of Singapore's reserves. Some have also questioned its high-profile investments, particularly its decision to pump billions of dollars into UBS and Citigroup at the height of the global financial crisis.

In an interview with The Sunday Times, Mr Ng said: "Once you have a long-term investment horizon, then from time to time, the markets will present you with an opportunity to make good long-term investments at attractive prices. If you are focusing on short-term results, this makes it difficult for GIC as an investment manager."

GIC's report out last year showed that it earned an annualised 3.9 per cent real rate of return over 20 years. In other words, the annual return was 3.9 per cent above the global rate of inflation.

Mr Ng cited the global financial crisis, which struck in 2008 after Lehman Brothers collapsed. In 2007, GIC had decided to sell a large part of its equities, leaving it with cash in 2008. It then started buying more shares in 2009 as the market started to recover.

He added: "We made the decision to de-risk the portfolio at the time. We felt that the markets were priced to perfection and that it was risky to maintain the equity risk in our portfolio but when we reduced our position, the markets continued to go up."

GIC's portfolio by 2011 had also recovered all the losses suffered in the financial crisis. Mr Ng said: "If you were concerned about the short-term results, you wouldn't have the courage to do what is necessary for long-term value."

As to the question of how much detail to release about returns and investment strategies, Mr Ng is keen to distinguish between "transparency" and "accountability".

While many call for increased transparency, Mr Ng argues that what they are asking for, in substance, is accountability and that he feels is a valid request.

"It is reasonable for the Government to hold the GIC management accountable for its performance and the public to hold the Government and GIC accountable," he said.

GIC does offer more points of comparison since two years ago. It now provides the five- and 10-year return of a portfolio made up of stocks and shares that a pension fund might hold.

Over time though, Mr Ng admits that there may be more information disclosed as GIC tries to respond to the challenge of helping the public understand what it does.

"It's a constant communication process. That's because the benefit is not as clear as a one-to-one where when GIC earns $1, Singaporeans get the $1.

"GIC's investment returns flow through to the government budget which then allows the Government to spend on different areas."

While the relationship between Singaporeans, GIC and the Government is one challenge, another is attracting talented Singaporeans to work for it.

The organisation now employs about 1,200 people here and overseas. Foreigners are needed as GIC operates in global markets, but Singaporeans are key too.

This is to ensure that the "management leadership has a sufficient number of Singaporeans who are committed to the long-term development" of the organisation, noted Mr Ng, whose successor is a GIC veteran, Mr Lim Chow Kiat. Mr Ng remains as an adviser to GIC.

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