Friday, June 12, 2009

Temasek takes a new direction

On October-1 Charles Goodyear will become the new CEO of Temasek, the Singapore sovereign wealth fund. Here is a quick look at some facts about Temasek from the recent Nomura report.

The fund experienced a 23% YOY decline and is currently at about USD 100 billion. It was a massive loss for 08 with some value recovered in 09.

As it has in the past, the fund is expected to continue divesting Singapore assets and reallocating abroad.

Geographic allocation

The most shocking fact is that Temasek is currently 40% in financials. That has got to raise some questions at the government level. And that may be the reason for the CEO replacement.

Sector Allocation

The new CEO Goodyear is likely to reduce exposure to financials. We already saw the fund dump Bank of America shares (from it's original 14% stake in Merrill). One way to accomplish that will be to divest directly some of Fullerton Financial Holdings (FFH), Temasek’s financial holding company. Watch for an IPO or a private sale of a portion of FFH. So no more Western banks for Temasek. In fact the shift may be away from public companies altogether.

Also expect to see increased focus on natural resources and infrastructure. The new geographic allocation will be China, Latin America, Africa, Russia, and South India.

Even after taking losses, Temasek has a potential spending power of USD 21 billion, which they will invest via partnerships, regional offices, and local private equity funds. That much capital to play with should get people's attention.

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