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Singapore sovereign fund GIC pares UBS stake at a loss

 | May 16, 2017

The fund said, however, that its investment in US bank Citigroup Inc, also made at the height of the global financial crisis, was in the black and that combined returns for UBS and Citi were positive in "mark-to-market terms."

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SINGAPORE: Singapore sovereign wealth fund GIC Private Limited, which invested in UBS to support it during the 2008/09 global financial crisis, said it has cut its stake in the Swiss bank at a loss, partly because of changes in the lender’s strategy and business.

GIC, which manages more than US$100 billion globally, said it has reduced its stake to 2.7% from 5.1%.

“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,” Lim Chow Kiat, chief executive of GIC, said in a statement issued on Monday.

“It makes sense now for GIC to reduce its ownership of UBS and to redeploy these resources elsewhere,” he said.

The fund said, however, that its investment in US bank Citigroup Inc, also made at the height of the global financial crisis, was in the black and that combined returns for UBS and Citi were positive in “mark-to-market terms.”

GIC measures its performance on an overall portfolio basis, based on long term rather than annual returns.

GIC is keeping its profitable investment in Citi.

“We remain a shareholder of Citibank. As with all our investments, we continue to manage our position based on our assessment of the fair value of Citigroup and other investment opportunities,” a GIC spokeswoman said in an email to Reuters on Tuesday.

The sovereign fund had reduced its stake in Citi to under 5% in 2009 from over 9 percent but didn’t disclose subsequent holdings.

Reuters data on Monday showed GIC was not listed as among the top 50 Citi shareholders

UBS, the world’s biggest wealth manager, said separately on Monday GIC intended to place up to 93 million existing shares in UBS Group through a sale to institutional investors.

Shares of the Swiss bank closed 1.3% lower at 16.61 Swiss francs after the news, which unusually came during trading hours.

At the closing price, 93 million shares would be worth 1.54 billion Swiss francs ($1.55 billion).

GIC, owned by the government of Singapore, was one of the first sovereign funds to pump billions into Western banks, which were rocked by the financial crisis and suffered deep losses.

Singapore took a 9% stake in UBS in 2007 via an emergency capital injection when UBS unveiled US$10 billion worth of subprime writedowns. UBS said at that time that GIC would invest 11 billion francs.

The sovereign fund converted its 11 billion franc investment in UBS notes into shares in 2010.

Lee Kuan Yew, Singapore’s first prime minister, who ruled the city-state for three decades and was formerly the chairman of GIC, said in 2009 that the sovereign fund had invested “too early” in global banks such as Citigroup and UBS. Lee died in 2015.

UBS’s website listing of major shareholders said that Singapore as the owner of GIC had held a stake of 7.07% as of December 2014.

GIC Private Limited and its associates have agreed to a 90-day lockup period for the remaining UBS shares, UBS said.

UBS Investment Bank is acting as placement agent on the sale.


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