GIC: Some real, some nominal, no S$ returns?

GIC: Some real, some nominal, no S$ returns?

By Leong Sze Hian


4% real returns last 20 years?

I refer to the article “GIC reports steady 4% real returns” (Straits Times, Aug 2).

Stopped reporting in both S$ & US$ since 2009?

According to the GIC annual report, “The nominal rates of return have been reported in USD terms since our 2009 report as the USD is the most common currency base for publishing global investment returns that allows for easy comparison.” (“Easy comparison” for Singaporeans also?)

US$ only to avoid confusion?

In this connection, last year – in a Parliamentary reply to NCMP Mrs Lina Chiam – the media reported that “Minister of State for Finance Josephine Teo explained that the GIC stopped publishing its nominal returns expressed in Singapore dollars three years ago, to avoid confusion when comparisons are made with other fund managers or global indices.

Its annual reports include the nominal return in US dollars as that is the commonly expressed basis internationally for comparisons of investment returns achieved by global investment funds.

Elaborating on the problem of confusion, Mrs Teo said: “Indeed, in previous years, we found that some readers (of GIC’s annual reports) had compared GIC’s returns in Singapore dollars with the returns of global market indices in US dollars.””

2.55% real return in US$?

MAS annual average on the SGD USD conversion rate from 1993 to 2013

As GIC’s real annualised rate of return was 4.0 per cent  in US$ for the last 20 years, with the US$/S$ exchange rate (Monetary Authority of Singapore’s (MAS) web site) declining from 1.6453 from 26 March 1993 to 1.2436 on 28 March 2013, I estimate that the real annualised rate of return in S$ was only about 2.55 per cent.

Uniquely Singapore?

I believe it may be quite difficult to find any fund manager in Singapore managing funds for Singaporeans to deliver 2.55 per cent real annualised returns in S$, for the last 20 years.

Minus 3.46% real return in S$?

With regard to the nominal annualised rate of return of 2.6 per cent which is lower than last year’s report’s 3.4 per cent in US$ for the last five years, with the US$/S$ exchange rate declining from 1.3799 on 31 March 2008 to 1.2436 on 28 March 2013, I estimate the nominal annualised rate of return in S$ to be about only 0.49 per cent.

After adjusting for annualised inflation in Singapore of about 3.95 per cent from 2007 to 2012 , I estimate the real annualised rate of return in S$ to be about minus 3.46 per cent.

Also, why is it that the GIC’s annual report can give the real annualised return in US$ for 20 years, but not for 5 or 10 years? Only the nominal annualised returns are given for 5 and 10 years.

“More or less” confusion?

If my computed estimates above are correct, I wonder whether Singaporeans are now “more confused” or “less confused” by the decision not to disclose the GIC’s returns in S$ too?

Why would continuing to disclose returns in both US$ and S$, like in the past, be “confusing”?

Do you see any logic in this?

Clarity and transparency?

Giving the returns in US$ and S$ may instead give more clarity and transparency to the performance of the people’s reserves.

Confusing for GIC, but not for Temasek?

If indeed disclosing GIC’s returns in S$ too is “confusing”, then why does Temasek disclose its returns in S$?

NCMP Mrs Lina Chiam may have to ask again?

Perhaps NCMP Mrs Lina Chiam may have to ask a similar question again this year too. And hopefully this time round, the Parliamentary reply will also give the return in S$, instead of avoiding NCMP Lina Chiam’s question on the GIC’s return in S$ altogether, like in the previous year?

Finally, surely, answering an MP’s question in Parliament, by giving the return in Singapore dollars, can’t be deemed to be confusing to all the Members in Parliament too! (even if we concede to the argument that it is confusing for Singaporeans!)

Reference: “GIC: Distinquish between “transparency” and “accountability”?” (Feb 24, 2012)

Leong Sze Hian is the Past President of the Society of Financial Service Professionals, an alumnus of Harvard University, authored 4 books, quoted over 1500 times in the media , has been host of a money radio show, a daily newspaper money column, Wharton Fellow, SEACeM Fellow, columnist for theonlinecitizen and Malaysiakini, and invited to speak more than 100 times in about 25 countries on 5 continents. He has served as Honorary Consul of Jamaica and founding advisor to the Financial Planning Associations of Brunei and Indonesia. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.

He runs his own blog at on financial advise and government statistics.

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