Temasek’s evasiveness is only going to fuel speculation and ire.
The tide of Temasek-related bad news seems almost interminable.
Weeks after reports that the government’s main holding company had to endure a huge write-down after selling its stake in Bank of America, an article in Reuters surfaced on 3rd June 2009 saying that Temasek may have suffered another sizeable loss on its stake in British bank Barclays, which it supposedly sold off at the beginning of this year.
Temasek responded to the Reuters report in a statement carried by the Today newspaper on 5th June.
Its spokesperson questioned the accuracy of the sources, saying that “a number of such reports are inaccurate and misleading” and “advise[d] the public to take steps to verify the information independently”.
He added that it was “not Temasek’s policy to respond” to such reports, which might explain why the spokesperson was only quoted on Today and why no statement has been officially issued by Temasek.
Unfortunately, Temasek’s response is likely to stoke just the kind of speculation that it was supposed to allay in the first place. Far from assuaging the concerns of citizens, whose confidence in the country’s sovereign wealth funds have been battered over the past months, it will probably trigger a fresh round of public ire over the funds’ unaccountability and seemingly poor performance.
Furthermore, it would not have escaped notice that Temasek has fallen short of explicitly contradicting the Reuters report. “Advising” the public to verify the report independently is disingenuous – the public can hardly do much if Temasek itself refuses to confirm the report.
What Temasek seems to have failed to recognise is that it is precisely its lack of disclosure which has created a void that is being filled by frenzied speculation. The situation seems to have been mishandled from the start by Temasek and its political masters, who appeared to have thought at first that they could get away with surreptitiously unloading Temasek’s loss-making stakes.
When this was blown by the subsequent disclosure about the sale of the stake in Bank of America, the government gave an unconvincing explanation that was completely at variance with its confident assertion just months earlier that its long-term investing horizon would be immune to short-term fluctuations. Such episodes only served to fuel rumours and public ire.
Temasek and the government need to change their attitudes about transparency. The problem is that Temasek thinks it is being transparent enough. It likes to point to positive reviews about itself: the latest Linaburg-Maduell Transparency Index on sovereign wealth funds gave it a perfect score for the first quarter of 2009.
However, this masks the huge gap between Temasek and the index’s leading fund – Norway’s Government Pension Fund (PGF). For example, the latter makes quarterly reports, while Temasek’s last report (released in August 2008) used data from March 2008. The PGF discloses how much it pays its managers, Temasek’s report carried a length discourse about how it compensated its staff but did not actually reveal the amount.
Clearly such gaps are no longer tenable, given the heighten levels of public scrutiny and the unspoken but clear demand for more accountability. Public ire hinges less on the losses made than with the perceived unaccountability of Temasek and the government.
But it is unlikely that the government, so used to believing in its mastery over the management of the country’s reserves, will oblige. It will probably hope for an up-tick in the markets to dampen the political heat. A Business Times report on 1st June, for example, calculated that Temasek might have recouped half of its paper losses in Singapore equities after the recent rally. (Apparently Temasek didn’t feel that such a report warranted a response.)
In the meantime, though, the government should be prepared for more uncomfortable questions, such as whether the President was aware of the losses incurred by Temasek when he made his decision to unlock the reserves. Or a more pertinent one: whether that other fund, the Government Investment Corporation, holds other similarly inconvenient truths.
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38) David on June 7th, 2009 1.33 pm
Those massive losses will be recouped by another GST hike if you give pap the mandate again the next election.
At whatever cost it takes, the pap will do whatever they can, openly or underhand, they will tweak the system in such a way that they will remain in power. Believe me, they will, AT WHATEVER IT TAKES! Unless . . . . . there be an expected uproar or break away coming from within its own party, then there is nothing you can do about it.
Temasek’s and ministers’ public statements on its losses seems to indicate that Temasek does not think it made any mistakes in its ML, Barclays, Shin,and ABC Learning investments.
Only activists and media want transparency for the sake of transparency.
People’ juz want reassurance that Temasek has learnt lessons from these investments.
One reason why Warren Buffett is respected (other than for his record) is that he hs readily admitted he goofed — American Airways, Salomon Brothers and ConocoPhillips
Let me share my views about the role of sovereign wealth funds and long term investments.
1. All short term investments are speculation, i.e. gambling. We gamble in the hope of making a gain.But, in every gamble, there is the chance of making a loss.
2. The SWFs had made good profits during the past years, when the global assets were in a bubble, due to low interest rate. So, the fund managers looked like heros.
3. The global downturn has now occured (as it should) Past profits were generated on top of high leverage, risky speculation (that the bubble will continue to grow). The 35% drop in asset price is what it should be. It reflects more closely the real value of the assets (less the speculative bubble).
4. It is better to recognise that we were all big time gamblers, and be ready to take the loss when the time comes!
What should we do in the future? The advice of Jack Bogle of Vanguard is the best that I have heard. He said, “invest in the economy. Buy the stocks and bonds of the big companies and keep them for the long term”. His reasoning is – you do not know who will be the winners or losers, as it will change from time to time. By investing in the economy, he recommended a well diversified fund.
Clearly, the speculation in the global banks last year was a bad mistake, and costly one. But to be fair, I personally thought that it was a good move at that time. But I did not know that these global banks were doing all kinds of nonsense business, such as high leverage, subprime lending, CDOs, swaps, etc. If I were paid a million dollars as a fund manager, it would certainly be my job to carry out the due diligence and stay away!
Lesson for the future? Take the advice of Jack Bogle, or Warren Buffett. At least, Warren Buffett is more honest and accountable. If he made a big mistake, he admiteed it!
Accountability is a real issue here because it takes courage for one to be accountable and take responsibility for what has gone wrong.
If you cannot admit a small mistake, would you admit a big one ? If you cannot admit a big mistake (like this one ?), would you admit a mistake ?
“I am not you mother. So I cannot tell you how to live your life. (Come to think of it, neither can your mother)
I am sharing what the CPF miniumun sum is about. Everyone is affected. Good luck.”
“The info is from CPF board. not what I say.
Thank you.”
So everyone is affected. And because the info of CPF board says so. Who cares about the emotionless static info on miniumum sum just like who cares about you not being the mother of another person. People do care when they cannot have a free hand on their CPF money. Just stick to your kopitiam.
Why were the shares sold at Low when bot at Hi?
Did not uncle said its for Long Term?
Ah lah lah lah lah Long ah lah lah lah lah Looong looooong loooooong loooooong day!
Its NOT about the Losses.
IT IS about the DISCLOSURE of INVESTMENT Failures, If Any.
ITs About Timeliness of Reporting.
ITs About the Perfect 10 of Transparency.
ITs About CREDIBILITY.
ITs About INTEGRITY.
So as to achieve.
Majulah!
Hi #53 TKL,
My views:
1. Agree that buying a well diversified index would be a low cost low risk long-term solution. I think they have good intentions of trying to maximise gain by actively managing the fund. But this is a very difficult thing to do both financially and politically – even if they were to invest in an index, some people will won’t buy the fact that it’s for the long-term and also that the index goes down with the market.
2. More importantly, I believe the choice of active/passive management is half the problem. The bigger problem is whether how much to decide for the people, and how much to let the people decide for themselves on how manage their pensions. Initially conceived to help the low income workers save for their retirement, the “one-size-fits-all” pension fund now serves all sorts of people with greatly differing needs, risk appetite, investment knowledge, and political affinity.
hi Two Things,
i agree with your point;
“the “one-size-fits-all” pension fund now serves all sorts of people with greatly differing needs, risk appetite, investment knowledge, and political affinity.”
49) Ah Siao on June 7th, 2009 6.26 pm
OMG… You are right !!!!! So when we get old just wait and hope to die off sooner and release the pain and burden of our children and the society of having us around ……
So SAD ….. We might be entering into Singapore’s Dark Age…..
so have they gambled away all the money?
loved that movie by Zhang Yimou, “LifeTime” where the rich man’s son gambled away all the wealth of the family ….
62) borderless on June 9th, 2009 5.46 pm
I think if a new government takes over, they will have to “RUN ROAD” cause Singapore might suddenly have to drop back to 3rd world….
To answer your question….. it may be already all gone…. who knows?
if money really all gone then they have to auction all their belongs to recover as much as we can.
if can continue to work they can survive on $1000 (even if they earn $50,000), the rest will be paid back like tax loh.
O$P$ loh.
As I expected. Nothing comes out of all the postings and comments and articles.
We continue to Wait and Wait.
If you want anything to be done… show them you are serious by voting NOT for them. Then they will know you mean business.
Mr Tan at #53
Agree with your statement “I personally thought that it was a good move at that time”. So did I.
Also agree that “If I were paid a million dollars as a fund manager, it would certainly be my job to carry out the due diligence”.
What to do? Who do we complain to?