Quote:Investments must be marked to market Mark to market accounting is the gold standard for preparing financial statements. It reflects the current/fair value of an investment eg GIC bought UBS shares at 47.7 CHF (converted from UBS notes after earning CHF 2 billion from coupon rate) and the fair/current value should be about 17 CHF. The mark-to-market value shows the investment is only worth 35% of its original value. (17 CHF divide by 47.7 CHF) Even after taking into account the coupon rate gain of CHF 2 billion, the UBS investment is still sitting on paper losses of about CHF 5 billion. GIC sent to ICU by UBS investment GIC’s performance is not as stellar as made out to be by the government. In fact, it appears to be punting with CPF monies and has been simplistic and even reckless! In 2007 when GIC invested in UBS notes with a coupon rate of 9%, it ignored the unfolding US subprime mortgage crisis and sank S$13.75 billion (CHF 11 billion, exchange rate about 1.25) of CPF monies into UBS. Why should the world’s largest manager of private wealth pay a 9% coupon rate? UBS appears to be having the last laugh. In 2007, total CPF members’ balance was $137 billion. (chart below) A prudent fund manager would not have sunk 10% of total funds into a single investment. GIC was totally reckless. The board of directors should have been held accountable.
Posted on: Thu, 26 Jun 2014 06:54:42 +0000
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