Disappointed With UBS Loss, Singapore's GIC Fund Slashes Stake

GIC says it pared UBS stake at a loss; combined strategy with Citigroup sees positive return

Singapore's GIC slashes its UBS stake with RM6.9bil sale

UBS, the world's biggest wealth manager, said separately yesterday GIC meant to place up to 93 million existing shares in UBS Group through a sale to institutional investors. "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. UBS Group AG will not receive any proceeds from the Transaction.

But GIC continued to nurse deep losses on the UBS investment, a situation made worse by several scandals that the Swiss bank was caught up in.

GIC had bought into Switzerland's biggest bank by purchasing bonds that converted into stock during the financial crisis, when the bank was reeling from losses on subprime mortgage bonds.

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According to the Business Times, "GIC took stakes in UBS and Citigroup early in the financial crisis as part of a tactical move into a beleaguered financial sector".

GIC, which manages more than US$100 billion (RM431.85 billion) globally, said it has reduced its stake to 2.7 per cent from 5.1 per cent.

The fund said, however, that its investment in U.S. bank Citigroup Inc, also made at the height of the global financial crisis, was in the black and that combined returns for UBS and Citi were positive in "mark-to-market terms".

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The sovereign wealth fund became UBS' largest shareholder during the financial crisis as it stepped in with a series of rescue cash injections in 2007 and 2008, with the stake peaking at 7.07% in 2014.

"Maybe GIC just found better ways to invest their money, maybe they had enough of banking", said Peter Casanova, a Kepler Cheuvreux analyst.

GIC did not say how much it sold its stake for, but shares of UBS fell 1.3 per cent to about 16.61 francs.

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By the time GIC completed the conversion of its 11 billion Swiss francs ($11 billion) of notes, the stock had lost about two-thirds of its value, though the unrealized loss was partly offset by interest payments.

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