After the sale, GIC will hold to 2.7% of UBS, down from 5.1%.
The sale is equivalent to offloading 93 million existing shares, according to a separate statement from UBS, adding that the sale will be done through an accelerated bookbuild offering to institutional investors.
“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,” Lim Chow Kiat, GIC’s CEO, said in the statement.
UBS was one of two major investments GIC made in the early stages of the global financial crisis, the other being an investment in Citigroup, according to GIC. At the time, the banking sector was under considerable stress, and there were opportunities as well as risks in making such major investments, GIC noted.
Although the sovereign wealth fund said it was disappointed that the UBS investment resulted in a loss, its investment in Citigroup has earned a positive return. The combined return in UBS and Citigroup has been positive in mark-to-market terms, according to the statement.
For the full year 2016, UBS Group reported a net profit of CHF3.2bn ($3.22bn), which is a huge drop compared to the previous year’s CHF6.2bn, according to the bank’s 2016 annual report. Its diluted earnings per share was also down to 0.84 compared to 1.64 in 2015.
“It makes sense now for GIC to reduce its ownership of UBS and to redeploy these resources elsewhere,” Lim said.
Singapore’s GIC invests in six asset classes: 20-30% of its portfolio is in developed market equities, 15-20% in emerging market equities, 25-30% in nominal bonds and cash, 11-15% in private equity, 9-13% in real estate and 4-6% in inflation-linked bonds, according to GIC’s website.
According to GIC’s figures, its portfolio averaged 4% per year real returns over the 20-year period from 1996 to 2016.
