11/29/2013

Our SWFs are furiously investing overseas

Recently it was reported that our SWFs were investing in micro financing in China and India, lending money to the poor to do small businesses. If the objective is to do charity and philantrophy, I think this is a worthy cause. Yesterday it was reported that one was investing in Bollywood. And there was the fame investment in a childcare chain in Australia. Last time a GLC with a niche in heavy industry and engineering went into fast food business.
 

The impression given is that they will invest in anything that they think can make money. You know what am I thinking? What’s next would they be investing, the oldest profession?
 

What is the driving force in the SWF’s investment strategy? Do they have a clearly defined mission or is the mission simply to invest and to make money? The fear of SWFs blindly investing in anything that came along is always there. There are two factors that could lead to this kind of no strategy and directionless investment strategy. One, the abundance of funds and not knowing what to do. Secondly, there are too many highly paid fund managers who have to show their worth and also to generate profit to be rewarded with big bonuses.
 

A fund that has too much money is a good thing. But this can be a dangerous thing as well when there is a fear of not investing. The money cannot be left idle. So, instead of waiting for the right opportunity, for a good investment to come along, they went shadow chasing. Anything that moves, buy. Would be wiser to only invest in the right thing, solid investment like blue chip companies, and not in anything? Even blue chips or the best of blue chips can be dangerous, just don’t be conned.
 

With so many fund managers managing the funds and needing to prove themselves and wanting to have a big share of the bonuses, and with the mentality that it is other people’s money, the tendency to invest for the sake of investing is always there. Not investing is like not working and not putting in a bet for the big bonus payout. The reward system only rewards good returns not prudence. Prudence doesn’t pay.
 

SWFs that are managed by professional managers run the risk of gambling when every fund managers are playing high stakes for high returns with OPM. A SWF may be better managed by financially trained civil servants that take a longer perspective and showing more care and prudence in handling public funds. And the reward system must take cognizance of the risk versus caution divergence. Both are equally important. 

Rewarding only big risk takers will incur the big risk of losing everything when they invest in snake oils, including you know what and when due diligence is best forgotten. Geylang would make an extremely great enterprise when reorganized under professional management. Gambling dens too will generate exceptional returns.
 

Are there moral considerations and stringent criteria and guidelines laid out to govern the way fund managers managed SWF’s money? I am very sure they have. Or is it a case of as long as it can make money go for it? Investing SWF is investing the people’s savings, the CPF money that the people slogged for a life time and cannot be lost by wild gambling and punting. The guardians of the people’s savings must be prescient and cast a watchful eye over how the money is thrown around the world. It is not Other People’s Money. It is The People’s Money. The people did not ask that the money be used for gambling, to take high risk, like private funds and hedge funds with willing investors knowing what they are in for. The SWF’s owners are captive prisoners that have no choice in how their money is being used.
 

The guidelines in how these money can be used must be very stringent and not to take high risk, not to invest when there is nothing good to invest. At times it is better to earn that little interests or dividends and wait for a better opportunity to come along. The two wrong reasons to invest are: One, a lot of money, so must invest. Two, must invest to show profit, so as to be rewarded.

17 comments:

agongkia said...

Not interested in whoever or whatever investment one is interested as its not my money.

Just dun stop me from my investment of producing what I want to produce every where and dun consider my investment as oversea gambling.I would be grateful.

Anonymous said...

RB, I think you are getting it right, where fund managers and their bonuses are concerned. Tiok.

But most important is for a political party to get it right with majority Sinkie voters during elections. Because without getting this right, forget about getting other things right, tio bo?

Don't believe, just ask Chee Soon Juan, son of JBJ, Chiam See Tong, Nicole Seah etc.

Even Low Thia Khiang also did not get it quite right.



Ⓜatilah $ingapura⚠️ said...

When it is not your money, there's a propensity to take more risk than if the money was yours -- earned by hard work, blood and sweat.

Temasek/ GIC seem to be doing alright. Their net positions are up.

Everyone who's ever invested has picked a money-losing "lemon". That should not be held against them -- unless they continue to lose on other investment choices.

And, before anyone gets any funny ideas NO. The money/ assets in the SWFs do not belong to you, or any of that nebulous term -- "The People". It is The State which is Sovereign. All the filthy lucre held in the SWFs are property of THE STATE -- the absolute territorial power of law and taxation.

Anonymous said...

The funds are getting bigger on paper. Is it due to profits or due to cash injections or due to inflation?

Fund managers are free from punishment or penalties. Look at the big American banks and fund managers. They can cheat, and con and get away with the banks funds paying the billions in fines.

When there is no individual accountability, it is scary.

Ⓜatilah $ingapura⚠️ said...

@1027:

>> Look at the big American banks and fund managers. They can cheat, and con and get away with the banks funds paying the billions in fines.

Err... I don't think you'd want to be caught cheating whilst working for Temasek/ GIC. It's like working for the Mafia -- dun do a stupid thing like cheat; it would likely be lethal if you get caught.

Cheating an SWF is akin to treason, which carries a maximum penalty of death.

>> When there is no individual accountability, it is scary.

Rest assured, there is accountability, but it is mostly kept "in house".

In cuntrees like Australia, the media hates SWF's -- especially Singapore's SWFs coming in and plonking down huge amounts of cash to "buy stuff" -- everything from land banking, to water rights, to owning Optus, the Australian Stock Exchange, SIA taking over Qantas business by "unfair competition"...the list goes on. So it is wise for Singapore's SWFs to tread quietly and control as much as possible the amount of information going out about their activities.

The State has the means and the right to be secretive. ;-)

Veritas said...

My blog got a new entry.

SAP schools, An epitome of Chinese sufferings and humiliation

Hi RB, use you comment to promote my blog.

Anonymous said...

MS, don't talk cock lah. What accountability, what treason or death penalty?

Go ask Merrill Lynch, Goldman Sach, Citibank, Swiss Bank when they cheated the two SWFs of billions by selling them rotten apples.

Chua Chin Leng aka redbean said...

Hi Veritas, you are welcomed.

Ⓜatilah $ingapura⚠️ said...

@1127

>> Go ask Merrill Lynch, Goldman Sach, Citibank, Swiss Bank when they cheated the two SWFs of billions by selling them rotten apples.

Please lah. That's not cheating. That is a legal transfer of assets -- assets which went bust after the fact.

Derivatives a bona fide financial instruments. If you dun understand, then dun fucking buy.

No one "forced" SWFs to buy those derivatives. The trade was VOLUNTARY, pure and simple.

I suggest a remedial business class for you. You obviously have difficulty understanding how buying and selling works ;-)

Chua Chin Leng aka redbean said...

Buying snake oil is also voluntary. Buy minibonds and Lehman bonds are also voluntary.

Ⓜatilah $ingapura⚠️ said...

Yup. Caveat Emptor is the catch phrase if you're going to play in any capitalistic action.

Otherwise fuck off and don't play. No one is forcing you.

Anonymous said...

Asshole cannot tell the difference between cheating and caveat emptor. Want to give advice some more.

jjgg said...

And in the meantime....which is the worst performing market last year and this year?...come to think of it...temasick sold its stakes in our power plants and invested heavily in the cashew nut trader..wow...we at the mercy of foreigners for our power but can supply the rest of the world in nuts...what a bunch of monkeys!! Hehe

Ⓜatilah $ingapura⚠️ said...

@1209:

Please lah...

"You can't cheat an honest man"

I would say, unequivocally, that you are the one who is the asshole ;-)

Chua Chin Leng aka redbean said...

An asshole talking to another? What, poot poot? And poot poot?

b said...

They do it because they can. This is the results of having too many sheeps among the people. This bollywood dream will end up as a burst bubble. They will be blamed for inciting violence and rape this media.

Anonymous said...

Should stop pumping more money into the SWF and start to return the money to the people. At the current size of funds, the 2 SWFs should be able to generate enough returns to fund whatever they want and should also earn enough to start paying back.

It is sinful to keep drawing the people's saving for these boys and girls to play with and risk vaporising the people's hard earned money.