GOVERNMENT OF SINGAPORE INVESTMENT CORPORATION PTE LTD (Investments made through Rockefeller & Co (Far East))

Mr Low Thia Khiang asked the Minister for Finance whether the Government of Singapore Investment Corporation Private Limited suffered any losses from investments made through Rockefeller & Co (Far East) from 1st January 1994 to October 1996.

The Minister for Finance (Dr Richard Hu Tsu Tau): Mr Speaker, Sir, the GIC has incurred some loss in its investments made through Rockefeller & Co and is in the process of ascertaining the amount. GIC is seeking to recover the loss attributable to possible wrong-doing of the Managing Director of Rockefeller & Co (Far East) Limited. Discussions with the parties involved are under way and it is therefore premature to disclose the extent of the losses.

Mr Low Thia Khiang: Sir, would the Minister be able to give us a rough estimate of the amount of losses?

Dr Richard Hu Tsu Tau: As I said, at this stage, because the investigation involved transactions over several years, it is quite complex. I do not think it will be desirable to make any broad estimates. As soon as we have the information, this will be made public, if the Member wishes.

Mr Low Thia Khiang: Sir, I would like to know from the Minister on what basis was Rockefeller & Co selected by GIC to be its fund management company.

Dr Richard Hu Tsu Tau: Rockefeller is an established fund management company. GIC employs a range of such fund managers and there was no indication earlier on that this company had any particular problems. I would like to point out that it is a specific manager employed by this particular company who caused the trouble, and not the company itself. Their reputation has been good prior to this.

Mr Low Thia Khiang: Are there any established procedures or criteria in GIC selecting its fund mangers?

Dr Richard Hu Tsu Tau: I think the basic criteria are the company must have a good track record, it is well-established, and have a good reputation, particularly on its performance criteria.

Mr Low Thia Khiang: After appointing the fund manager, does GIC check or monitor the portfolio investments of the fund manager?

Dr Richard Hu Tsu Tau: Indeed, it does. It checks the performance of all fund managers employed by GIC, principally based on their return on the investments. So all fund managers' performance is compared regularly.

Mr Low Thia Khiang: When did GIC discover, through this monitoring which the Minister just mentioned, that Rockefeller & Co has actually made some losses in the funds which were invested on behalf of GIC?

Dr Richard Hu Tsu Tau: The actual information on this particular person's misdeeds were in fact reported by Rockefeller themselves. It would be very difficult for GIC to monitor from the performance itself because the amount would be small relative to the total funds managed. I would like to point out that when a fund of a sizeable amount is managed by a fund manager, normally the performance depends on market conditions and the ability to earn a return based on their investment portfolios. If the company is doing reasonably well, to be able to identify malfeasance on the part of a particular trader is extremely difficult. In this case, it was in fact reported by Rockefeller themselves who do, on their own, carry out checks on the performance of their dealers worldwide.

Mr Low Thia Khiang: May I confirm with the Minister that this case was actually discovered by Rockefeller instead of GIC?

Dr Richard Hu Tsu Tau: Yes, it was.

Mr Low Thia Khiang: How does GIC ensure that such a similar case would not happen again because it seems to me that GIC was unable to discover the problem?

Dr Richard Hu Tsu Tau: It is impossible to detect every single dealer's transactions which might go wrong considering the large size of the investments which are managed. To track accurately will require sustained tracking of performance which could involve market movements also. It is a very complicated procedure.

Mr Low Thia Khiang: What is the Minister's assessment of the risk involved in such an investment since GIC is unable to track accurately every dealer's transactions?

Dr Richard Hu Tsu Tau: I think the risk is very small. Do not forget that GIC has been in operation for many years and this is the first significant case we have come across. So the risk is relatively low.