GIC estimated to have lost at least US$7B of reserves in UBS investments

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It was reported yesterday (15 May) that GIC Pte Ltd, the Singapore government’s investment arm, is selling around half of the UBS stake it bought at the height of the financial crisis in 2007.

GIC is selling 93m shares worth about US$1.6 billion, or 2.4 per cent of UBS’s total share capital.

Before the sale, GIC’s ownership was 5.1 per cent. It will now own 2.7 per cent or shares worth US$1.8 billion after selling the 93m shares through an accelerated bookbuilding to institutional investors.

In late 2007, GIC decided to invest in UBS when the bank was undergoing a financial sub-prime crisis. At the time, UBS was trying to raise capital amid a US$10 billion writedown on subprime mortgage investments.

By the time GIC completed the conversion of its 11 billion Swiss francs (US$11 billion) of notes into shares in 2010, UBS had lost about two-thirds of its value. GIC continued to take heavy losses as UBS’s shares continued to plummet in subsequent years.

In all, GIC is estimated to have lost at least US$7 billion in UBS shares, assuming the remaining 2.7 per cent of UBS shares were also to be sold at current prices.

GIC said it is “disappointed” that it lost money on the UBS investment, according to an issued statement.

In July last year, GIC warned that one of its key measures of returns fell to 4 percent in the 20-year period ended March 31, 2016.

In the past year, GIC has embarked on a series of leadership changes and elevated many investment managers to key roles.

According to GIC’s website, it said that it manages “six core asset classes with well over US$100 billion of assets in over 40 countries.”

It’s not known how GIC is going to recuperate the losses of our reserves