Singapore: Sovereign Wealth Fund Moots Co-Investment Plan

Updated On: Aug 03, 2009

Singapore's Temasek Holdings is offering up some radical thinking on the direction of state-run funds.

The fund is considering allowing institutions, and eventually Singapore's public, to co-invest with it. For now, Temasek is calling the plan a long-term one, and offering few details on how the model will work.

It is by no means certain at this stage that Temasek will seek to raise funds from the public, let alone small investors. Temasek chief executive Ho Ching stressed on Wednesday that it was still studying whether it is feasible to get the public to co-invest with the firm.

If Temasek decides to pursue the plan, it would first test it on 'sophisticated' co-investors before allowing retail investors to participate - a pilot process expected to take up to eight years, Ms Ho said.

Temasek’s proposal comes after heavy devaluation of its portfolio in the global economic crisis and the lack of transparency in recent loss-making decisions. 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. Criticism has also been aimed  at the fund's decisions to inject billions into Barclays and Merrill Lynch in 2007, and the subsequent sale of Temasek’s stake in these companies.

Despite its often repeated long-term focus, Temasek rushed to exit these investments suffering huge losses and missing the market's recovery. The fund sold its stake in Bank of America in the first quarter of this year, and its stake in Barclays in December and January. 
Shares of Barclays have tripled since late January, and Bank of America has nearly doubled since the end of March.

Those hoping the appointment of an outsider, Charles Goodyear, to head the fund would inject some fresh thinking were disappointed last week when the company abruptly changed its mind.

Temasek cited "strategic differences." Mr. Goodyear's inclination for riskier investments and changes he wanted in management didn't sit well with the board, according to some.

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 a new set of stakeholders which may make investment decisions more accountable.


Asia One, Temasek co-investment plan creates a buzz, 2 August 2009, http://business.asiaone.com/Business/News/My%2BMoney/Story/A1Story200907...

The Wall Street Journal, Temasek Tries a New Tack , 31 July 2009, http://online.wsj.com/article/SB124894874513993233.html

VC Circle, Temasek Holdings’ Assets Fell More Than $27 Billion, 29 July 2009, http://www.vccircle.com/500/news/temasek-holdings%E2%80%99-assets-fell-m...

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