Here is my interview with the Up Close radio program from the University of Melbourne. Eric van Bemmel and everyone were a pleasure to work with and really sought to understand sovereign wealth funds.
Early Saturday morning, I was sent numerous emails from people about a Financial Times story about American material scientist Shane Todd who was working at the National University of Singapore. Todd died under mysterious circumstances in shortly before he was to leave his position at NUS for a position in the United States. While the Singaporean police maintain it was a suicide, with a formal inquest scheduled for March, there are significant inconsistencies and extremely troubling aspects of this story.
First, Todd told friends and family that he was being forced by his NUS research laboratory to provide dual use military technology to Chinese company telecommunications giant Huawei. Huawei has been linked to a variety of questionable behavior including among other things selling internet spyware networking technology to Iran in violation of UN sanctions. According to the Financial Times report, the NUS research lab has refused to cooperate in the investigation.
Second, Todd told family that if anything happened to him they should call the American embassy in Singapore and that it would be linked to his work at the NUS research labs work with Huawei. When people tell other people what to do if they turn up dead and then turn up dead, those warnings should be taken seriously. Furthermore, his friends all indicate that Todd was in a good mood and happy to be returning back to the United States. There is no indication that he was depressed or suicidal.
Third, there are enormous discrepancies in the police reports. From official descriptions of the scene which do not match his apartment and refusal to consider evidence that someone was using his computer after his death despite electronic evidence to the contrary.
While I will render absolutely no verdict on the cause of death of Mr. Todd as it is important to gather a lot more evidence and information, there are many unanswered questions that warrant further investigation.
I can only speak to my personal knowledge that given the frequency with which Temasek and other government linked corporations have established joint ventures with known weapons proliferators selling high grade precision machinery to Iran or partnered with the largest Burmese drug lords, it comes as no shock that a respected NUS research lab would be accused of working to obtain dual use military technology for Huawei. Now again, I will render no verdict about whether NUS has sanctioned behavior Mr. Todd accuses it of doing as there is a lot more evidence that is needed before reaching a decision. However, there should be an absolutely full investigation of the accusations leveled against NUS in potentially acting in concert with Huawei to obtain military technology for the PLA.
Finally, I have been warned by many people to never come to Singapore. Whether it is to avoid a friendly “coffee” or more serious problems, like Mr. Todd’s. Given the seriousness of the charges I have made against people, I think it only prudent to wherever I go look over my shoulder and take other prudent measures. People will take extreme actions for a lot less than the $300 billion that I claim is missing from Singaporean accounts. Given events like this, I can understand others (my pregnant wife included) concern for my safety.
I would call on the Singapore government to not only thoroughly investigate the matter of Mr. Todd but to do so in a completely transparent manner providing all evidence to the public. Only by thoroughly answering all questions and providing the proof to interested parties will these questions be answered. Hiding evidence, obfuscating the truth, and refusing to fully investigate this matter will only raise more questions.
I am frequently asked how I became interested in Singapore and the unique case of Temasek Holdings and the Government of Singapore Investment Corporation (GIC). Despite conspiracy theories in which I work for a hedge fund, the communist government of China, or those crazy American capitalists, the truth is much more boring.
In 2007 and 2008, I worked at a think tank in Santa Monica, California and I became interested in sovereign wealth funds. Headlines on sovereign wealth funds were exploding in the news with all nature of fear mongering about the potential for combining state political power with financial might. Interested in understanding the behavior of sovereign wealth funds, like Temasek and GIC, rather than believing the news driven fear mongering headlines, I set out to assemble data that might would help us assess their investment patterns. I subsequently spent many months pouring through data sources such as corporate filings, Securities and Exchange Commission records, my local Bloomberg terminal, and Thompson Datastream to assemble data that would provide me insight into their behavior.
Published on an academic paper database in June 2008 with the sexy title “A Portfolio Analysis of Sovereign Wealth Funds”, it was covered in a variety of outlets such as the Wall Street Journal among others. Written with much rhetorical flourish, it contained such incendiary claims about Singapore as:
“Examining the public equity holdings of Temasek Holdings and the Government of Singapore Investment Corporation (GIC), both Singaporean sovereign wealth funds, for whom good records exist, their holdings indicate a conservative portfolio of global equities.”
“…Singaporean SWF’s do not appear to assume risks other sophisticated investors do not also assume.”
“…the Singaporean SWF private equity investment record seems both rational and respectable.”
While I understand that these claims were inflammatory to absolutely no one, given the data in 2008 they were entirely defensible and based on all available evidence at the time. However, as John Maynard Keynes notes, “when the facts change, I change my mind.”
In the spring of 2010, I began writing my book entitled Sovereign Wealth Funds: The New Intersection of Money and Power. It was during this process having studied other sovereign wealth funds that I attempted to reconcile Temasek’s claim of having earned 17% annually since its inception in 1974. Knowing the long term returns of stock markets and other major sovereign wealth funds averaged from 6-9% depending on the riskiness of their portfolio or their respective market, I was curious to find out more about what investment strategy SWF’s used to pull off such spectacular returns. I then began by trying to find their investment strategy and holdings.
I quickly realized that I could not come close to reconciling the 17% annual returns claimed by Temasek with either the broader market or individual holdings. Of all the sovereign wealth funds I reviewed, Singapore and its respective funds were the only funds with serious financial discrepancies. For instance, those funds claim to earn a rate of return consistent with investments they are known to have held but also inflows and outflows could be reconciled such that there did not appear to be large differences.
Singapore and its funds, Temasek and GIC, were the only instance I could find where serious discrepancies existed between a) the rate of return claimed by a sovereign wealth fund and the broader market b) the rate of return claimed by a sovereign wealth fund and individual investment holdings and c) the claimed assets under management, capital inflows, and claimed annualized returns.
After discovering such a large discrepancy in Singapore, I looked hard at other funds and countries and simply could not find a discrepancy of a remotely similar magnitude. And believe me I looked hard at other countries and funds. The differences are well beyond anything that might be considered a rounding error or understandable difference.
I never at any point set out to write extensively about Singapore it is only that its public finances simply cannot be explained or reconciled. Given the inflows from public surpluses and borrowing for the purposes of investment as claimed by the government coupled with the claimed high rates of return, there simply should be a lot more money than is listed on the government balance sheets. The government may be able to evade questions and concerns about their finances from someone like myself but they simply cannot avoid the laws of mathematics.
It was simple academic curiosity of continuing to ask questions that drew me to study Singapore, Temasek, and GIC. I am not connected to Singapore in anyway and have refused to be drawn into Singaporean politics or endorse politicians. I will however continue to ask questions and try to find the truth of what has happened to the money lent by CPF account holders and the years of surpluses paid out in taxes by ordinary citizens.