Temasek said on Tuesday (October 6) that it would combine the quartet under Seviora Holdings, forming a group with S$75 billion ($54.3 billion) under management, which will be creating a shared technology platform.
The four firms are private equity-focused Azalea Investment Management (with S$7 billion in AUM), public markets investor Fullerton Fund Management (S$54.9 billion), venture lending platform InnoVen Capital (AUM not disclosed) and hedge fund-style manager Seatown ($7.9 billion).
Having previously held 100% ownership of Azalea and Seatown, a 51% stake in Fullerton and 50% of InnoVen, Temasek now wholly owns Seviora as a result of shareholding transfers via share purchase agreements, a spokesman told AsianInvestor by email.
"The new structure will allow the group to offer a broad range of products and investment strategies to clients, and to further strengthen and leverage skill sets and capabilities to build a larger platform for future growth in the asset management space, including in sales, fund-raising and distribution," he added.
Seviora will also benefit from economies of scale by building shared capabilities, such as the tech platform, that would otherwise not be possible given the size of each individual business, the spokesman said. "The larger group will also be in a better position to attract talent for a range of functions, including finance, risk, legal and HR."
The individual asset management firms will initially continue with their current strategies and to manage their own investment decisions, said the spokesman. "Over time, Seviora will work with them to differentiate their respective product offerings to reach out to a wider group of investors and to raise more money."
He declined to say how much of the assets of each subsidiary were managed for Temasek and how much for external clients.
Jimmy Phoon, the current chief executive officer of Seatown, will be CEO of Seviora and will retain his present role until a successor is appointed. Seviora’s chairman-designate is Goh Yew Lin, a non-executive director on Temasek’s board, the chairman of Seatown and also managing director of GK Goh Holdings, an investment company run by his father.
Temasek's move to combine the four units should come as no surprise, as it will help create efficiency, said the Asia Pacific head of asset servicing at a large American firm.
“The asset management industry is suffering from margin compression and the way out is scale,” he noted. “A lot of asset management functions can be run as utilities across different boutiques.
“For example, each brand is probably paying for its own research. So do you each pay $100 for a total of $400, or for $200 build your own research division or buy research collectively at the Seviora level?”
It could be a similar story for indices or custody services, the asset servicing executive added. Each unit may be licensing their own benchmarks from the likes of Bloomberg or MSCI or using a separate custodian.
A move to increase scale had already started at Fullerton when it took on the management of the public asset portfolio of Singapore life insurer NTUC Income in 2017. At the time it stood at S$23 billion or around 80% of NTUC’s total portfolio. This was understood to be a state-directed move.
The creation of Seviora should also instil a higher degree of oversight of the units by Temasek across the risk spectrum, said Diego Lopez, founder and managing director of New York-based consultancy Global SWF. He pointed out that CEO-designate Phoon was a long-time veteran of the sovereign fund, having worked as both its chief investment officer and head of strategy in the past.
Another likely ambition of Temasek’s move is to boost investment yield, said Lopez. Temasek lost 2.3% on its portfolio in the year to March 31, and while the Covid-19 pandemic contributed to this, it was probably not the only factor, he added.
“Having a more direct relationship with its asset managers will mean it is better able to set criteria for the investments they make on its behalf,” Lopez said.
The four firms in question seem to have been carefully chosen, as it would have been less logical to combine some of Temasek’s other asset management subsidiaries, he said. “It would have been hard to find synergies between [real estate developer and investor] Mapletree and InnoVen Capital, for instance."
Other Temasek subsidiaries include Pavilion Energy and Vertex Ventures.
The creation of Seviora may also ultimately lead to Temasek – which already manages a substantial majority of its portfolio internally – putting even more reliance on its in-house managers than before, Lopez added. He said he did not know how much the fund managed internally, but that it was more than its average peer.
The four entities have various international offices; for instance, Fullerton in London, Shanghai and Tokyo, and InnoVen in Beijing, Bangalore, Delhi and Mumbai. Temasek is likely to want to invest more in its own entities than in external managers in those overseas locations, Lopez said.
Of course, it will also be looking to expand its subsidiaries’ external client base. The new set-up should help it do so, suggested Javier Capape, director of sovereign wealth research at the IE Center for the Governance of Change in Madrid.
Seviora will be able to offer integrated solutions to large global investors, he said, as certain blended products may require the firms’ combined expertise. “The subsidiaries will retain operational independence,” he added, “yet will benefit from strategic integrated views.”
However, Gary Smith, founder and head of London-based think tank Sovereign Focus, questioned whether the firms would retain genuinely independent investment policies over the long term.
“In the private sector, experience suggests that the answer is no,” he said, “but it will be interesting to see how a government-owned entity proceeds.”