August 13, 2001
SINGAPORE'S GIC SECRETS
By Eric Ellis
Step aside, Sage of Omaha. You've got big-time competition in Singapore.
Not even the legendary Warren Buffett has made the calls claimed by Singapore's Government Investment Corp.
Indeed, the state-owned fund seems to have anticipated every major event of the past 20 years, including the 1987 stock market crash, the Gulf War oil shock of 1990, and the Asian financial crisis of 1997-98. The fund's managers even claim to have gotten in early on Cisco Systems' amazing rise.
That's quite a record. Problem is, unlike shareholders in Buffett's Berkshire Hathaway, Singaporeans can't verify the GIC's boasts. Its portfolio, said to be worth more than $100 billion, is a state secret. The fund doesn't have to file annual reports, justify profit-and-loss statements, or even report to Parliament. And its managing director of markets, Ng Kok Song, decries transparency as a "fashionable subject" that has little place in his offices. In top-down Singapore, when government officials say the fund has been a huge success, Singaporeans are expected to believe them.
The GIC is so secretive that many Singaporeans are suspicious about its source of funds; some believe the money comes from a compulsory state savings plan. (The GIC denies this and says its funds come from government reserves and surpluses.) But as Asia's economies slither into another recession, criticism has gotten louder. "The GIC says it is no different from other fund managers like Fidelity," says Singaporean-born professor Linda Y.C. Lim of the University of Michigan's business school. "So if you've got as good a record as they claim, why not shout it from the rooftops?"
Finally, the government seems to be listening. Sort of. With an election looming and "corporate governance" the business watchwords of the day, a kind of glasnost seems to be arriving at the GIC. Singapore Senior Minister Lee Kuan Yew, who chairs the GIC, recently revealed who sits on the fund's board: many of the same safe hands who run the other government-owned companies that make up as much as 60% of Singapore's economy. And he approved publication of a book commemorating the fund's 20th anniversary that reveals some superb calls--and some eyebrow-raising duds. There's the $220 million the GIC blew when China's state-owned Guangdong International Trust & Investment Corp. went belly-up in 1998-99. And the $100 million it pumped into Astra, the struggling Indonesian carmaker, a move that seemed designed to prop up the presidency of Abdurrahman Wahid. (The GIC also had a stake in the controversial Myanmar Fund, which invested in Burma.)
But you don't build up a $100 billion portfolio without some winners. In a rare interview, Ng, 53, who's been with the fund almost since its inception, told fortune that being invested in the U.S. stock market since 1981 has "generated excellent returns." The GIC rode Pfizer's wild Viagra trip and has done well with Microsoft, both big investors in Singapore. Perhaps most impressive, the fund staked $25 million in data-services provider Equant in the early 1990s and cashed out for $368 million before last year's tech wreck. (That Cisco bet was less successful: The GIC sold its $8 million stake in the mid-'90s, only to see its value blossom to more than $1 billion last year.)
Is the GIC's secrecy coming to an end? Lee continues to argue that full disclosure of its holdings could imperil Singapore's currency in these volatile times. But many economists argue that the fund's purportedly stellar record couldn't possibly harm the currency and say the government's stonewalling is getting harder to defend. Be that as it may, Ng did tell fortune that GIC funds are more likely to be directed across Asia in the coming years, "bottom-fishing" for investments as economies bounce out of recession. Of course, he wouldn't identify specific countries. After all, at the GIC that would be equivalent to giving away state secrets.