GIC offloads whopping 93m UBS shares, says it is “disappointed” with loss

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“Singapore’s investment vehicle is selling around half of the UBS stake it bought at the height of the financial crisis,” the Financial Times reported on Monday, 15 May.

It was referring to the Government of Investment Corporation Singapore, now GIC Pte Ltd, one of two sovereign wealth fund in Singapore.

GIC is reported to be offloading a whopping 2.4% – or 93 million shares – of its UBS Group holdings, and in the process reducing its stake to 2.7%.

The 2.4% is worth some US$1.6 billion, the TODAY newspaper reported.

“GIC made the UBS sale despite the loss because conditions have changed fundamentally since GIC invested in UBS in February 2008, as have UBS’ strategy and business. It makes sense now for GIC to reduce its ownership of UBS and to redeploy these resources elsewhere,” GIC chief executive Lim Chow Kiat said in a statement.

According to the statement, GIC said it is “disappointed” that it lost money on the investment.

It is unclear how much exactly is lost but it was reported in 2008, when GIC purchased the shares at the height of the global financial crisis, that it invested US$11.5 billion in the bank.

At the time, Forbes reported the purchase:

“As one of the world’s oldest sovereign wealth funds, GIC has been making the transition to a more aggressive investment posture far earlier than others.”

Singapore became the bank’s largest investor in 2010 when the securities (debt), which it had bought assumed earlier, were converted into stocks.

The crisis “offered a rare chance to take major stakes in the international banking sector,” GIC said in its statement.

“The combined return on the UBS and Citigroup investments has been positive in mark-to-market terms,” GIC said, referring to the other investment it had made at the same time then.

According to the Business Times, “GIC took stakes in UBS and Citigroup early in the financial crisis as part of a tactical move into a beleaguered financial sector. The UBS stake was initially about 9 per cent in 2007, as UBS sought emergency capital amid US$10 billion of write downs related to subprime mortgages. GIC in 2008 also invested about US$6.9 billion in Citi convertible preferred securities, which were later converted into common stock. GIC later halved its Citi stake, realising a profit of about US$1.6 billion.”