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Temasek Holdings' Assets Fell More Than $27 Billion

30 July, 2009

Singapore’s sovereign wealth fund Temasek Holdings’assets fell more than $27 billion (or a fifth of total) for its financial year ending March’09 over the same period last year due to few poor equity calls and global markets crash which shrunk asset values. One of the biggest global sovereign funds in terms of its investments in India, Temasek is now also considering a move to open the fund to public investment which could add a new shade of accountability in terms of operations.

Temasek whose succession planning for the post of CEO has received a setback with the departure of Charles Goodyear (former BHP Billiton executive) few days back, today said it may allow public investment for the first time. It would seek “sophisticated co-investors” to raise funds, according to Temasek’s existing CEO Ho Ching, who incidentally is the wife of Singapore’s PM Lee Hsien Loong.

Goodyear was expected to take over as the CEO in October this year, making him the first foreign CEO to lead the sovereign wealth fund. Although exact reasons for his departure is not known yet, as per one thinking his ideas of management strategy was considered too risky by other top executives.

The state-run fund is now looking at both internal and external candidates for the role of chief executive.

NEW SOURCE OF FUNDS:

Temasek is now looking at raising funds from public directly besides the existing source of capital which draws from nation’s wealth. The strategy could be initiated with high networth individuals/private funds in 5-8 years and thereafter allow retail investors to put in money into the fund.

This move could create new set of stakeholders which may make investment decisions more accountable.

INVESTMENT STRATEGY & INDIA CONNECTION:

The fund is looking at Asia and Latin America as investment destinations and is still comfortable with financial services as its core portfolio holding. This is despite suffering losses on some prominent deals in Western banks such as Merrill Lynch after the market meltdown last year.

Temasek had earlier sold its 3.8% stake in Bank of America (after it bought Merrill Lynch in which Temasek had invested) at a loss estimated to be more than $4 billion and also suffered a haircut when it sold its stake in Barclays around seven months ago. Incidentally, India’s Manish Kejriwal (who heads the India office of Temasek) was one of the key members of the team that decided to invest in Merrill Lynch.

At that time Kejriwal had given the statement, “This capital raising will enable Merrill’s management to focus on the execution of its business strategy and deliver shareholder value. Our participation in this capital raising exercise is a vote of confidence for the management team, and the underlying strengths of Merrill Lynch’s franchise.”

His involvement was through his role in the banking practice of the PE giant for which he was given an office in Singapore, besides the one in Mumbai. He was reportedly part of the core team of around half a dozen people involved in the Merrill Lynch transaction and the deal was also struck in record time of just about 3-4 weeks of negotiations.

Meanwhile, Temasek is also eyeing investments in food and energy areas.

Over the last few years Temasek had expanded outside Singapore and increased financial assets to 40% with equity stakes in Merrill Lynch, Barclays and Standard Chartered. Temasek also holds a significant minority interest in India’s largest private bank ICICI Bank, besides being a large investor in largest mobile operator Bharti Airtel and other firms.

ASSETS:

Temasek’s assets were valued at S$127 billion as of November end 2008 compared with S$185 billion at the end of March’08. “In our Temasek Review last year, we reported an annual value-at-risk of almost S$40 billion ($27.8 billion) last March. This meant a 16% probability for our portfolio value to drop more than S$40 billion by March this year. Indeed, it has turned out to be so, and more,” Temasek’s CEO has disclosed.

Temasek is the biggest shareholder in five of Singapore’s 10 biggest publicly traded companies by market cap including SingTel and DBS. The fund’s CEO has however said Temasek will not sell ‘family jewels’ for short term gains.


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Temasek Holdings' Assets Fell More Than $27 Billion

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