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<TABLE border=0 cellSpacing=0 cellPadding=0 width=452><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published July 9, 2010
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>COMMENTARY
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>The tough financial world that Temasek inhabits
It's not the first, and won't be the last, that does not get every decision right
By SIOW LI SEN
MARKETS have recovered - and along with them, Temasek's performance. But it was a subdued team that announced the Singapore investment company's latest results.
It's not quite the time to pop champagne corks. The market value record of $186 billion squeaks past the previous high by just $1 billion, and even this could have been eroded by volatile stockmarkets since April.
What else can be keeping the Temasek folks awake at night?
There are lots of pitfalls ahead, as the recovery in the United States and Europe seems to be stalling, with consequent increasing volatility in go-go Asia.
There are also worrying signs of overheating in China which is Temasek's second largest market, with 20-25 per cent share, after Singapore's 32 per cent.
Temasek makes no apologies for anchoring itself even more firmly in Asia, and will remain so given the global environment.
On paper, it said, the asset allocation is 78 per cent Asia, which includes 32 per cent Singapore. The Organisation for Economic Co-operation and Development (OECD) takes up 20 per and 2 per cent goes to the rest of the world. But the 20 per cent OECD is actually in Australia, through Temasek-linked companies SingTel, Singapore Power and CapitaLand.
Temasek may have been badly stung by its Western misadventures, but to have 98 per cent allocation in Asian/Singapore companies looks like going a tad overboard. It is a global investment company, after all.
Investment losses
Executive director Simon Israel even said Temasek will be over-weighting Asia in the foreseeable future.
Then there are the calls for more accountability that won't go away, as Temasek - to its credit - increases its transparency and disclosure. Sure, markets have recovered. But where does the responsibility for investment losses lie?
Mr Israel said there is accountability, although no one person calls the investment shots. Temasek does not judge people on the basis of individual investments but the investments' track record over time, he said.
Last year, Temasek took a massive estimated $5.5 billion loss from its Bank of America and Barclays investments.
Mr Israel defended the decision to exit investments at a loss, as Temasek took the view it could do better elsewhere, and it has since made 2.5 to 3 times with some of its rights issues in portfolio companies. Some pundits will note that Bank of America shares have rebounded more than five times - based on Wednesday's close - from the lows in first-quarter 2009, when Temasek bailed out.
Temasek watchers also point to Temasek-linked companies (TLCs) such as DBS, SingTel, Keppel Corp, CapitaLand and Singapore Airlines - which have helped lift its performance. But these TLCs are legacy investments.
Is it fair, though, to continue to haul Temasek over the coals for losses, because it was not the first investment manager - and won't be the last - that does not get every decision right, that sometimes sell low, is caught up in market exuberance or loses its nerve during a crisis?
Role model
Norway's Norges Bank Investment Management - held up as the role model for sovereign wealth funds - did name a new team of executives last year after it posted a record loss due to the financial crisis.
Still, Temasek is not exactly coddling its key managers. Its compensation framework is aligned to performance. And as it noted, the bonus pool that pays out over 3-12 years has been wiped out.
</TD></TR></TBODY></TABLE>
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>COMMENTARY
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>The tough financial world that Temasek inhabits
It's not the first, and won't be the last, that does not get every decision right
By SIOW LI SEN
MARKETS have recovered - and along with them, Temasek's performance. But it was a subdued team that announced the Singapore investment company's latest results.
It's not quite the time to pop champagne corks. The market value record of $186 billion squeaks past the previous high by just $1 billion, and even this could have been eroded by volatile stockmarkets since April.
What else can be keeping the Temasek folks awake at night?
There are lots of pitfalls ahead, as the recovery in the United States and Europe seems to be stalling, with consequent increasing volatility in go-go Asia.
There are also worrying signs of overheating in China which is Temasek's second largest market, with 20-25 per cent share, after Singapore's 32 per cent.
Temasek makes no apologies for anchoring itself even more firmly in Asia, and will remain so given the global environment.
On paper, it said, the asset allocation is 78 per cent Asia, which includes 32 per cent Singapore. The Organisation for Economic Co-operation and Development (OECD) takes up 20 per and 2 per cent goes to the rest of the world. But the 20 per cent OECD is actually in Australia, through Temasek-linked companies SingTel, Singapore Power and CapitaLand.
Temasek may have been badly stung by its Western misadventures, but to have 98 per cent allocation in Asian/Singapore companies looks like going a tad overboard. It is a global investment company, after all.
Investment losses
Executive director Simon Israel even said Temasek will be over-weighting Asia in the foreseeable future.
Then there are the calls for more accountability that won't go away, as Temasek - to its credit - increases its transparency and disclosure. Sure, markets have recovered. But where does the responsibility for investment losses lie?
Mr Israel said there is accountability, although no one person calls the investment shots. Temasek does not judge people on the basis of individual investments but the investments' track record over time, he said.
Last year, Temasek took a massive estimated $5.5 billion loss from its Bank of America and Barclays investments.
Mr Israel defended the decision to exit investments at a loss, as Temasek took the view it could do better elsewhere, and it has since made 2.5 to 3 times with some of its rights issues in portfolio companies. Some pundits will note that Bank of America shares have rebounded more than five times - based on Wednesday's close - from the lows in first-quarter 2009, when Temasek bailed out.
Temasek watchers also point to Temasek-linked companies (TLCs) such as DBS, SingTel, Keppel Corp, CapitaLand and Singapore Airlines - which have helped lift its performance. But these TLCs are legacy investments.
Is it fair, though, to continue to haul Temasek over the coals for losses, because it was not the first investment manager - and won't be the last - that does not get every decision right, that sometimes sell low, is caught up in market exuberance or loses its nerve during a crisis?
Role model
Norway's Norges Bank Investment Management - held up as the role model for sovereign wealth funds - did name a new team of executives last year after it posted a record loss due to the financial crisis.
Still, Temasek is not exactly coddling its key managers. Its compensation framework is aligned to performance. And as it noted, the bonus pool that pays out over 3-12 years has been wiped out.
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