Issue 1 : Temasek claims average returns of 17%...how is this possible?
[Comparing Temasek’s Performance in Two Pictures]
1. Temasek assets are mostly in the form of in a diversified portfolio of listed companies many listed in Singapore.
2. Since 1974, the annualized returns of the MSCI Singapore and other Singapore indices have performed nowhere close to the 17% return reported by Temasek.
This issue has been discussed by a Singaporean J.P Tan. I first read about J.P. Tan from a a highly acclaimed book on Warren Buffett by authorAndrew Kirkpatrick. J.P. Tan had independently deciphered one of Buffett's investment move and wrote to Buffett....a very impressed Warren Buffett replied to J.P. Tan to say his analysis was spot on. J.P Tan's letter and Buffett's reply both appeared in "Of Permanent Value: The Story Of Warren Buffett".
J.P. Tan has used his analytical skills to decipher Temasek's accounts from 1992-1993 and found that Temasek had book a $40B in gains following the listing of SingTel[Link]. J.P. Tan explains that this is most probably achieved by the transfer by the Singapore govt of SingTel to Temasek at book value of $20B and when SingTel was listed, the market value of $60B was used to record profits of $40B. J.P Tan takes issue with this as it "misrecords" profits at Temasek. The $60B should be record as cash infusion rather than profits. This form of accounting obscures the actual fund management performance at Temasek and makes it impossible to tell how well managed our reserves are at Temasek. It is very dangerous for us not to know the actual performance of Temasek.
Deceptive as it seems, I wrote to Prof. Balding that this is one possible explanation for the high investment returns claimed by Temasek. He agrees that this is a plausible explanation.
The question that our MPs can raise in parliament for this issue that concerns all of us are 1. How are assets transferred Temasek accounted? 2. How does Temasek record profits from sales and listing of these assets? 3. What is the real performance of Temasek if we take out these 'profits'?. Our power plants are a good example. They were transferred to Temasek and then later sold off to foreign investors. Temasek shouldn't book any investment profits from these sales as it would these are "inherited assets" and booking returns on them will obscure the real performance at Temasek.
Issue 2: What happened to hundreds of millions?[Singapore, Inc.: Just When You Thought it Couldn’t Get Any Worse]
2. The sum total of surplus, liabilities and returns should give us the size of GIC assets. GIC return is given as roughly 7% per annum.
3. Prof. Balding estimates the size of GIC's assets to be $2 trillion.
4. GIC has assets reported to be $700B.
I think the simple explanation is nobody knows the size of GIC's assets and how much surplus is transferred to GIC. We just don't have enough information to tell if there is something really wrong here. The PAP govt simply refuses to be transparent and accountable when it comes to the accounts of the GIC. - they just simply refuse to let us know and we are supposed to just accept this.
Voting for an independent presidential candidate would have help to answer some of these questions but we missed this chance.in 2011.
"Unfortunately, I have this crazy idea that governments should be responsible to the people. Whether it is the United States, Chinese, or Singaporean government, I believe leaders should be accountable and transparent to the people of their country. Governments do not have unlimited powers. I believe that the government of Singapore should be accountable and transparent with the people of Singapore. I believe that the people of Singapore have a right to demand answers from their government."
- Professor Christopher Balding[My only vested interest]