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Update: GIC sells 2.4% UBS stake for a loss
GIC has sold just under half of its stake in Swiss bank UBS Group for a loss, the Singapore sovereign wealth fund announced on Tuesday.
GIC has reduced its stake to 2.7 per cent from 5.1 per cent, selling about 93 million shares of UBS worth about US$1.6 billion as at Monday's close.
"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. It makes sense now for GIC to reduce its ownership of UBS and to redeploy these resources elsewhere," GIC chief executive Lim Chow Kiat said in a statement.
GIC took stakes in UBS and Citigroup early in the financial crisis as part of a tactical move into a beleaguered financial sector. The UBS stake was initially about 9 per cent in 2007, as UBS sought emergency capital amid US$10 billion of writedowns related to subprime mortgages. GIC in 2008 also invested about US$6.9 billion in Citi convertible preferred securities, which were later converted into common stock. GIC later halved its Citi stake, realising a profit of about US$1.6 billion.
While the UBS investment has not panned out - GIC said it was "disappointed" in the loss - the Citi investment has generated enough returns for the strategy to have positive overall returns on marked-to-market terms so far, GIC said.
"These investments took advantage of GIC's ability to invest long term, and offered a rare chance to take major stakes in the international banking sector," GIC said. "The sector was then under considerable stress, and there were opportunities as well as risks in making such major investments."
In recent years, GIC, a long-term investor that manages Singapore's reserves, has had to navigate prospects of higher volatility and subdued global growth. In its latest annual report, GIC said that it aims to maintain a portfolio diversified across multiple dimensions, and that it will continue to explore new asset classes and portfolio construction approaches.
Despite Tuesday's sale, GIC has not shied away from financial investments. In April, the group took part in a US$1.9 billion investment in Spain's Allfunds Bank. Recent GIC moves have included real estate and technology investments.