American Club reeling from investment losses during financial crisis

American Club reeling from investment losses during financial crisis

Irate members raise questions on club’s choice of instruments, urge it to go into conservative mode

by Conrad Raj editor-at-large |
05:55 AM Oct 08, 2010


Today Exclusive

SINGAPORE – One of Singapore’s most prestigious social clubs is reeling from investment losses incurred during the financial crisis.

Today has learnt that after losing $16.58 million in bad investments in its 2009 financial year, The American Club has recovered less than $850,000 of the losses on the disposal of its investments a year later. Overall, it reported net income of $3.32 million for the financial year ended June 30 this year.

While the club, which boasts some 3,500 members, reported the losses before last year’s annual general meeting, most of its members appear to have been unaware until the minutes of the meeting were circulated a month ago.

The discovery of the losses has infuriated some of its members, who made their grievance felt to Today.

Said one irate member: “The losses amount to almost 30 per cent of the $56 million given to the fund managers that year to handle.”

Another member questioned why the club did not place its money in bonds and “other safer instruments”.

According to the club’s minutes, Morgan Stanley Asia (Singapore), who are the club’s investment advisers, explained that the use of hedge funds was to reduce risk. Morgan Stanley’s representative at last year’s AGM further explained that using hedge funds saved the club money.

A glance at the financial statements showed that the club had reduced its investments in debt instruments from just over $21 million in FY2009 to $16.5 million in FY2010.

Quoted equities went up from $18.65 million to $26.22 million while mutual funds invested in equities increased from $1.93 million to $9.09 million.

The previous year’s loss, however, did not prevent the club from investing even more with Morgan Stanley and the amount placed went up from $56.54 million in FY2009 to $63.50 million this year. As a result, management fees for the inverstments rose from $325,000 in FY2009 to $455,993 in FY2010.

Today understands the club is looking into proposals from other investment managers. Typically, a request for proposal is carried out every five years by the club’s Investment Sub-Committee, which is composed “primarily of people in the field professionally”.

Meanwhile, some members called for the club, which will hold its AGM next month, to go into a “conservative investment mode”, with one member suggesting investing all the money in gold.

While most clubs put their surplus cash into safe instruments like bonds, some place their money in riskier instruments to obtain better returns, In 2001, the Singapore Island Country Club reported losing $12.4 million while dabbling in the stock market.

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