The Government of Singapore Investment Corporation has cut its stake in UBS after the Swiss bank failed to perform.
By John Pennington, edited by Francesca Ross
The 11 billion Swiss francs (US$9.7 billion) investment that the Government of Singapore Investment Corporation (GIC) made in Swiss bank UBS was the largest single investment in its history. Nearly 10 years later, and facing losses of around US$4 billion, the GIC has cut its remaining stake from 5.1% to 2.7%.
Senior leaders in the GIC expected their investment would deliver significant returns as the markets recovered from the financial turmoil of 2008, but this never happened. The UBS hedge fund Dillon Read Capital Management failed in 2007 and poor trading strategy added to the bank’s spiralling debt as the US sub-prime mortgage crisis struck.
UBS was forced to take more write downs and raise more capital during this period. This meant Singapore’s government did not make the return it had hoped for.
The GIC’s investment of US$6.9 billion in Citigroup, which was made around the same time, is more successful. “GIC is disappointed that the UBS investment resulted in a loss, but its Citigroup investment has earned a positive return,” the corporation’s statement announcing the decision read.
“The combined return on the UBS and Citigroup investments has been positive in mark-to-market terms,” it added.
Disappointing results forced the GIC’s hand
Decision-makers at the GIC were among the first to place emergency funds into both UBS and Citigroup at the start of the 2008 global financial crisis. They did this by buying UBS debt which was later converted to capital offset by a 9% coupon.
Former deputy chairman Tony Tan said at the time “We regard our investments in UBS and Citigroup as long-term investments, which will give us good returns when markets stabilise and economic conditions return to more normal levels.”
Those returns never came to fruition and everything changed following the recession. Regulation reforms limited the banks’ ability to risk their own money. UBS’ stock price never came anywhere close to where it had been.
UBS Share price (US$)

Source: Yahoo Finance
Former Prime Minister and then-GIC Chairman Lee Kuan Yew said as early as 2009 that the firm had invested too early. Later investors, such as Qatar’s sovereign wealth fund, made money by playing the waiting game to obtain better terms.
The relationship between GIC and UBS was complex
“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,” said Lim Chow Kiat, GIC chief executive. UBS has concentrated its strategy since 2012 on wealth management and GIC is now keen to, “redeploy those resources elsewhere,” according to Kiat.
The relationship had been on poor terms for some years. The GIC leadership rebuked UBS for trading errors which cost US$2.3 billion in 2011. Switzerland’s financial regulator Finma reprimanded UBS for its role in the 1MDB debacle and the Monetary Authority of Singapore (MAS) fined UBS S$1.3 million (US$950,000) soon after.
Members of the GIC team were not actively involved in the bank’s decisions and could not prevent damage to their interests. No Singaporeans were appointed to senior positions within UBS and GIC had no obvious input in the direction of the bank.
The GIC did still receive benefits from the deal
The GIC leadership has noted the serious losses and difficulties of the UBS deal but it did have some positive returns. The Singaporean investment vehicle received 2 billion Swiss francs (US$2 billion) in interest before converting their mandatory convertible notes into shares. GIC subsequently received dividends of 2.45 francs per share, adding up to 602 million francs (US$612 million) between 2011 and 2016.
The arrangement also allowed Singapore to “take major stakes in the international sector,” which would not ordinarily have been open to them. These deals helped GIC diversify by adding investments in Europe and North America to their portfolio.
The GIC can absorb the loss and will move on
UBS may have proved a difficult investment but Citigroup has been a success and will remain in the GIC portfolio. This will be at a reduced stake of around 5%. The GIC team manages more than US$100 billion worldwide and has averaged 4% per year returns over the 20-year period between 1996 and 2016.
Their experience may also serve as a warning to other groups considering investment in Western banks, or even those – like China’s HNA Group – who have already invested. The GIC experienced enough to move on from the UBS deal and learn its lessons.
“While GIC does its best to ensure that each individual investment performs, it must accept a degree of risk in order to pursue promising opportunities and optimise overall portfolio returns,” their statement said. The GIC leadership team will now turn its attention to investments in the technology and health care sector, explained Group Chief Investment Officer, Jeffrey Jaensubhakij.