Published May 20, 2009

GIC sticking with its Citi, UBS investments

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(SINGAPORE) Singapore state investor Temasek's brief love affair with Wall Street banks has ended in tears, but the country's biggest sovereign wealth fund GIC is still sticking with its bets.

The Government of Singapore Investment Corp (GIC), which has ploughed billions into Citigroup and UBS, told Reuters that it was holding on to its investments.

'GIC is a long-term investor and will continue with its investments in Citigroup and UBS,' a GIC spokeswoman said yesterday. GIC is one of the world's largest sovereign wealth funds.

Last week, Singapore's other state investor, Temasek, said that it had sold a 3 per cent stake in Bank of America at a hefty loss of over US$3 billion, stoking investor concerns that GIC and other sovereign funds might follow suit.

Singapore's two funds have suffered from the global market turmoil, with GIC's portfolio falling 25 per cent from a peak estimated at US$300 billion while Temasek's assets declined by 31 per cent during March to November last year.

Cash-rich sovereign wealth funds were thrust in the limelight in financial markets after high profile investments in ailing Western banks in recent years, but are now licking their wounds as the financial crisis hammered stocks.

After being hit by paper losses, GIC agreed to convert its preferred Citi shares at US$3.25 a share in February, compared with an original price of US$26.35 a share. But its investment is now in the black as Citi shares were up to almost US$4 in early Tuesday trading in New York.

'If you look at Citi, it turned out to be pretty good for them,' said a banker who has advised sovereign wealth funds on M&A deals. The biggest fear over Citi earlier this year was a forced nationalisation, but analysts said those risks may have subsided. 'We think that the broad nationalisation concerns are behind us,' BlackRock's CIO Bob Doll told reporters in Singapore on Monday.

GIC's second major Western bank investment was UBS, which has a big regional private banking business in Singapore and plays an important role to cement the city-state's goal of becoming Asia's premier wealth centre.

'In the general financial malaise, SWFs are still one of the few remaining sources of capital willing to take on risk and opportunity amid the debris of depressed asset markets and lame banks,' Jan Randolph at IHS Global Insight said in a report this month on wealth funds. -- Reuters