In a rare glimpse into the secretive world of Singapore's sovereign wealth funds, Temasek Holdings has published its latest annual report.
The organisation unveils encouraging performance figures for the year to March 31, sets out its growing focus on Asia and gives more details about SeaTown, the new investment vehicle it set up in August (as revealed by AsianInvestor).
SeaTown may take in institutional co-investors in three to five years, after at least one market cycle of testing, says Simon Israel, executive director at Temasek Holdings.
The new fund's board and management set their own investment strategy, he adds. One major difference between SeaTown and Temasek is that the latter will remain chiefly in equities and focus mostly on Asia, says Israel, while the new fund will be more diversified in terms of geography and asset classes.
Having been seeded with S$4 billion ($2.9 billion) in capital, SeaTown is staffed with experienced secondees from Temasek -- such as SeaTown chief executive Charles Ong -- plus experienced personnel recruited externally, says Israel.
"Planning for [SeaTown] started three years ago in 2007, when we began thinking about the possibility of opening a platform for the Singapore public to co-invest with us," he says. "SeaTown is a testbed, if you will, to explore how this can be done in a sensible and sustainable manner."
In terms of financial results, Temasek ended the year to March 31 with a portfolio value of S$186 billion, up from last year's figure of S$130 billion and its previous year-end peak of S$185 billion on March 31, 2008.
However, group net profit is down, at S$5 billion, from S$6 billion in 2009. Moreover, after its portfolio suffered in the previous financial year, the SWF posted a one-year total shareholder return (by market value) to March 31 of 42% and five-year TSR of +11%.
Temasek made new and/or recapitalisation investments of S$10 billion and divestments of S$6 billion in the last financial year. Pre-March 31 investments include stakes in Canada's Niko Resources, Chile-based Lan Airlines, China ITS, China's Longfor, Trinity Limited in Hong Kong, Indian firm Sobha Developers, Seoul Semiconductor and Seoul Optodevice, Singapore's Olam International and US-based Amyris Biotechnologies.
Temasek's asset exposure to Asia has grown, and the SWF says it is likely to continue to grow. In terms of geographical exposure, the portfolio is 46% in Asia (excluding Singapore and Japan), up from 43% last year; 32% in Singapore, up from 31%; 20% in OECD economies (excluding Chile, Korea and Mexico), down from 22%; and 2% elsewhere, down from 4%.
This shift is part of a long-term plan, notes Israel. "Eight years ago, we embarked on a strategy to transform our portfolio to focus on Asia. In 2004, only one-sixth (16%) of our portfolio was in emerging Asia, excluding Singapore and Japan. Portfolio exposure to the mature OECD economies was higher, at one-third.
"We have moved from a mature and stable portfolio in 2004, to a portfolio stance today which is more balanced between growth and risks -- half in growth markets in Asia and elsewhere, and the other half in Singapore and the more mature OECD economies," he says.
Israel suggests the strategy has been vindicated. "Since the start of our Asia strategy in 2002," he says, "the new investments we made over the eight years have given us a good return of over 23%."
Meanwhile, Temasek announced two senior appointments to the firm in late May. Dilhan Pillay Sandrasegara will join as head of portfolio management on September 1, having previously been managing partner of law firm Wong Partnership. He has experience in mergers and acquisitions, covering both public and private transactions in Singapore and other jurisdictions in Asia.
Sandrasegara's predecessor is Ng Yat Chung, head of portfolio management and operations and co-head of Singapore, and Ng will retail the operations head and Singapore co-head role after September 1.
Hsieh Fu Hua will take on a full-time role as executive director and president from August 1, after joining the Temasek board on February 1 and being appointed special adviser to chief executive Ho Ching. In his new role, he will work closely with Ho and the Temasek leadership team on areas such as talent development and succession planning.