Temasek Holdings has defended its decision to cut losses on its Bank of America (BOA) exposure.
The investment agency also said that it compensates employees using a framework which emphasises the long term over the short term .
Since last week when Temasek disclosed that it had sold its entire 3 per cent stake in BOA in the first quarter, some have wondered what happened to its stated long-term strategy.
Sources have said that the sale resulted in a US$3 billion loss.
'Temasek invests with the objective of delivering sustainable returns over the long term. This means our investment strategy is not aimed at delivering target returns on a year-by-year basis,' said Myrna Thomas, Temasek managing director, corporate affairs in a letter to the media.
'To achieve our investment objectives, we constantly review our portfolio and rebalance it from time to time. We may choose to divest an investment, even at a loss, to optimise our risk or portfolio exposures, or if there are better opportunities elsewhere or later. We may also choose to hold or increase our existing investments.'
On its BOA sale, Ms Thomas said that its initial investment was in Merrill Lynch in December 2007 which was exchanged into BOA shares in January 2009, following BOA's completion of its September 2008 offer to buy Merrill.
'Our investment thesis had changed from Merrill's specific businesses to the more diversified BOA linkage to the broader US economy. The risk-return environment had also changed substantially.'
Ms Thomas said that Temasek was mindful of the risks it faces as it invests.
'We reinforce this risk-return balance through a compensation framework which puts the institution above the individual, emphasises long term over short term, and aligns employee and shareholder interests for both the upside and downside, over the medium and long term.'
Some observers say that no investment house gets it right 100 per cent. One private banker said that Temasek probably acted over speculation that BOA could be nationalised. 'If BOA was nationalised, they (Temasek) stood to lose everything,' she said.
There is also much speculation on how Temasek chief executive-designate Charles Goodyear will run the company when he takes over in October.
'I hear many are travelling, as they want to avoid him,' quipped one financial executive.
The investment agency also said that it compensates employees using a framework which emphasises the long term over the short term .
Since last week when Temasek disclosed that it had sold its entire 3 per cent stake in BOA in the first quarter, some have wondered what happened to its stated long-term strategy.
Sources have said that the sale resulted in a US$3 billion loss.
'Temasek invests with the objective of delivering sustainable returns over the long term. This means our investment strategy is not aimed at delivering target returns on a year-by-year basis,' said Myrna Thomas, Temasek managing director, corporate affairs in a letter to the media.
'To achieve our investment objectives, we constantly review our portfolio and rebalance it from time to time. We may choose to divest an investment, even at a loss, to optimise our risk or portfolio exposures, or if there are better opportunities elsewhere or later. We may also choose to hold or increase our existing investments.'
On its BOA sale, Ms Thomas said that its initial investment was in Merrill Lynch in December 2007 which was exchanged into BOA shares in January 2009, following BOA's completion of its September 2008 offer to buy Merrill.
'Our investment thesis had changed from Merrill's specific businesses to the more diversified BOA linkage to the broader US economy. The risk-return environment had also changed substantially.'
Ms Thomas said that Temasek was mindful of the risks it faces as it invests.
'We reinforce this risk-return balance through a compensation framework which puts the institution above the individual, emphasises long term over short term, and aligns employee and shareholder interests for both the upside and downside, over the medium and long term.'
Some observers say that no investment house gets it right 100 per cent. One private banker said that Temasek probably acted over speculation that BOA could be nationalised. 'If BOA was nationalised, they (Temasek) stood to lose everything,' she said.
There is also much speculation on how Temasek chief executive-designate Charles Goodyear will run the company when he takes over in October.
'I hear many are travelling, as they want to avoid him,' quipped one financial executive.
:oIo: 
