Bloomberg News

Singapore’s GIC, Temasek, MAS Set Up for Varying Risks

March 03, 2012

(Corrects story published on March 2 to add reference to central bank in second paragraph, change “situation” to “structure” in third paragraph.)

Temasek Holdings Pte (TMSK), Government of Singapore Investment Corp. and the Monetary Authority of Singapore, were set up to manage the nation’s funds and assets taking on different risk levels, a minister said.

The government “systematically” reviews the risks in its overall investments, comprising GIC (GIC), the sovereign wealth fund, Temasek, the state-owned investment company, and the Monetary Authority to ensure there are no major overlaps, Josephine Teo, minister of state for finance, said in Parliament in response to queries from lawmakers. It also ensures the entities have “competent boards” to make independent decisions, she said.

“The government does not decide on how each investment entity should manage its own portfolio,” Teo said. “It is a structure that has worked well, and that we will keep improving.”

GIC and Temasek, each managing at least $100 billion of assets, are ranked among the 10 biggest state-owned investment companies by Sovereign Wealth Fund Institute. Both spent more than $25 billion buying stakes in U.S. and European banks as the collapse of the subprime mortgage market led to more than $2 trillion in losses and writedowns worldwide.

GIC is the biggest investor of Citigroup Inc. (C) and UBS AG (UBSN), according to data compiled by Bloomberg. Temasek sold stakes in Charlotte, North Carolina-based Bank of America Corp. and London-based Barclays Plc at losses following the 2008 global financial crisis.

‘Look Very Similar’

GIC and Temasek are “starting to look very similar” recently, said Inderjit Singh, a lawmaker in the ruling People’s Action Party. He asked the Ministry of Finance to review the charters of both companies and to ensure there are no overlaps.

“We may be overinvesting and lack diversification in our investments which could come back and haunt us doubly hard if these sectors are hit by problems,” Singh said. “We have seen this when we were hit by a number of investments in financial institutions by both entities.”

The government monitors for concentration risks, and ensure the two companies and the Monetary Authority or central bank have proper mandates, Teo said.

GIC said in its annual report in July that it boosted investments in emerging economies to tap higher returns, and cut back in Europe and the U.S. Emerging-market stocks made up 15 percent of its holdings from 10 percent a year earlier, while those in developed economies fell to 34 percent from 41 percent. Investments in Japan accounted for 11 percent of GIC’s portfolio at the end of March, according to the report.

Both GIC and Temasek, which hold separate stakes in ICICI Bank Ltd. (ICICIBC), have also been reducing their interest in the Indian lender since 2009.

To contact the reporter on this story: Andrea Tan in Singapore at atan17@bloomberg.net

To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net; Lars Klemming at lklemming@bloomberg.net


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