Negative Bonuses For Temasek's Staff

To be fair, Temasek does have one of the fairer compensation system among "investing companies". In fact someone should recommend to Obama to adopt Temasek's bonus pool policy in his administration's attempt to revamp pay and bonuses on Wall Street.

The Straits Times: Temasek Holdings' portfolio lost more than S$40 billion in value in the last financial year, said chief executive Ho Ching yesterday. The exact figures for the 12 months to March 31 are not available yet, but the headline number indicates how the company has fared in the financial crisis. Temasek's next annual report, due out next month, will shed more light on the portfolio's performance.

In February, then Senior Minister of State (Finance and Transport) Lim Hwee Hua told Parliament that between March and November last year, Temasek had lost S$58 billion. Its portfolio value fell 31 per cent from S$185 billion to S$127 billion. It is unclear if Temasek managed to recoup any of those losses between November last year and March this year. But analysts say Ms Ho's comments yesterday indicate that even if Temasek did narrow its losses, it may not have been by much.

In a speech to the IPS Corporate Associates Lunch yesterday, Ms Ho said that Temasek had reported an amount of S$40 billion as its annual 'value-at-risk' for its financial year between April last year and March this year. This means there is a 16 per cent probability that the portfolio would drop by S$40 billion in the period, she said, adding: 'Indeed, it had turned out to be so, and more.'

Global stock markets plunged to record lows in early March, but have rallied strongly since. Nomura analysts estimated last month that Temasek had recouped a considerable amount of its losses between November and mid-May. They said the portfolio likely rebounded 13 per cent, or S$16 billion, in that time. But it is possible that most of these gains were made between March and May and will not be seen in the latest annual report.

The entire staff of Temasek Holdings are taking personal financial hits, with annual bonuses likely to be slashed in the wake of the investment firm's losses over the past year. Part of every Temasek employee's bonus goes into a pool that is paid out over a number of years rather than at the end of each year. When Temasek meets its internal performance benchmarks with higher-than-targeted returns, the pool of bonuses to be distributed grows and each employee gets a bigger slice. But when it fails to do so, employees get 'negative bonuses': They get no money from the pool, or the value of the overall pool shrinks. This compensation structure is based on a key principle of having staff 'share in the institution's performance, both for positive and negative results', said chief executive Ho Ching yesterday.

In her speech at the IPS Corporate Associates Lunch, she said: 'We share gains and pains alongside our shareholder. This is in essence having an owner's approach to our business and operations. Temasek came in below its targets last year as well as this year, which means staff get 'negative bonuses. From CEO to office attendants, all our staff were allocated negative bonuses last year, and will be allocated more negative bonuses this year,' said Ms Ho.

If Temasek achieves above-target returns, known as Wealth Added and reported in the annual Temasek Review, it will have gains to share with its staff. 'It is a tough challenge to share negative bonuses...it is even tougher to deliver a positive Wealth Added every year,' she said.

p/s photos: Linda Onn

Temasek's Team Under Ho Ching

I guess in an attempt to deflect criticism that it is a one-woman team, the cynical me would try to see through the "approved media blitz" via The Straits Times on the Temasek's senior management team. See how easy it is to twist words and intentions. It can be an exercise in transparency or propoganda to rebuild goodwill.

1 Charles Ong
Senior managing director and chief strategist

Formerly Temasek's chief investment officer in charge of overseeing all investment decisions, he became chief strategist in December 2006 while Temasek was grappling with the fallout from its takeover of Shin Corp earlier that year. Mr Ong, formerly with Lazard Freres & Co in New York, joined Temasek in 2002.

2 Tow Heng Tan
Senior managing director and chief investment officer

A chartered accountant, Mr Tow took over as chief investment officer after Mr Ong's replacement, Mr Jimmy Phoon, quit in 2007. Mr Tow also sits on the boards of Keppel Corp and ComfortDelGro, and was formerly senior director of DBS Vickers Securities.

3 Gan Chee Yen
Senior managing director and co-chief investment officer

The former director of finance for Singapore Technologies, Mr Gan joined Temasek in 2003 and heads the transportation and logistics investment group. He has served on the board of other companies, including Neptune Orient Lines.

4 Manish Kejriwal
Senior managing director, investment, international and India

A former partner at McKinsey and Company, Mr Kejriwal holds an MBA from Harvard University and was named a Baker Scholar, the top academic honour at Harvard Business School. He joined Temasek in 2004 and is in charge of investments in India and in financial services.

5 Cheo Hock Kuan
Senior managing director, corporate development and special projects

She joined Temasek in 2002 from Singapore Technologies, where she was head of executive resources and corporate human resources. A former military officer, she now oversees leadership dynamics, board governance and compensation for executives and board members, among other things. She is also a director of Fullerton Financial Holdings.

6 Leong Wai Leng
Chief financial officer, senior managing director (corporate development)

Appointed Temasek's first chief financial officer in 2006, she studied engineering at Cambridge University. She moved to Temasek after leaving Raffles Holdings - where she was the deputy chief executive and chief executive of Raffles International- after Raffles sold its hotel business.

7 Goh Yong Siang

Managing director, international and strategic relations

The former chief of the Singapore Air Force, Mr Goh retired in 1998 and went to work in the United States, first as president of ST Engineering and then in private equity. He was a partner in and chief executive of a Dallas, Texas-based charter airline, Patriot Air, which filed for bankruptcy less than two years after it was formed. Mr Goh joined Temasek in 2006 and was asked to head the Thai office that Temasek opened following the Shin Corp debacle.

8 Simon Israel
Executive director since 2006

Mr Israel is the chairman of the Singapore Tourism Board and sits on several other company boards, including SingTel, NOL and Fullerton Financial Holdings. A Singaporean, Mr Israel was previously Danone Group's Asia-Pacific chairman and spent 22 years with the Sara Lee Corporation.

9 Hiew Yoon Khong
Senior managing director, special projects

Previously CFO of CapitaLand and CEO of its commercial and financial units, Mr Hiew joined Temasek in 2003 and is now also the executive director and CEO of Mapletree Investments. Prior to that, he was managing director of Temasek's private equity investment funds portfolio.

10 Ng Yat Chung
Managing director, corporate

Less than four months after stepping down as Chief of Defence Force in 2007, Mr Ng joined Temasek in the newly-created position of managing director of portfolio management. A Cambridge University graduate, Mr Ng was also previously Chief of Army.

11 Michael Dee
Senior managing director, international

Formerly a Morgan Stanley investment banker and regional head, Mr Dee was recruited to join Temasek's newly-formed international division last year. He advised Temasek-backed Singapore Power when it bought the Australian business of energy giant TXU for $3.7 billion in 2004.

12 Vijay Parekh
Senior managing director, special projects

After 18 years with American Express, Mr Parekh joined Temasek in 2005 and became a director of Fullerton Financial Holdings in October 2006.

13 Jimmy Phoon
Senior managing director, strategy

Mr Phoon joined Temasek in 1999 but resigned in September 2007, less than a year after he was made chief investment officer following the Shin Corp incident. Formerly from Standard Chartered Merchant Bank Asia, Mr Phoon rejoined Temasek on Nov 1 last year.

p/s photos: Moe Oshikiri

How To Hire Well by Temasek

Temasek should really come out with a guidebook on "How To Hire Well", a follow up on "How To Maintain Your Ego While Losing Tons Of Money", completing the trilogy of books aka Lord of The Sing$ was "How To Buy Mega Companies Without Ever Visiting Them". I don't know what to say. Firing a CEO after hiring him, without him even officially starting is poor form. Wtf was the interview or interviews like??? Wasn't Chip even asked about his strategic mindset. I am certain Chip would have asked Temasek what their objectives were, short and long term. I am certain the interviewees would have asked Chip how he would go about achieving that, what his management style was, etc...

Suddenly, Chip is not the guy after all after just 4 months, but somebody who was supposed to be leaving ... is still hanging around. I am sure Chip would be fuming if not for the probably "excellent severance package" for just 4 months of work. Probably the package would need to be excellent enough in order to remind Chip not to speak "off the cuff" about his experience at Temasek over the last 4 months.

Is the culture clash so bad at Temasek? I didn't know Temasek is so inbred!!! Either somebody is not acting professionally, I am loathed to guess who. I mean Chip has run BHP Billiton, so I think Chip would know the decorum and "best global practices" on Senior Management 101.

Obviously, Chip did not really get to call the shots. Chip does not need the aggravation or somebody looking over his shoulder. Chip has made his money. Chip is outta here. Chips Ahoy!

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Finance Asia:

Charles (Chip) Goodyear will not, after all, become the first foreigner to run Temasek Holdings, the Singapore government investment company. The surprise announcement comes just four months into the leadership transition period, which should have ended with Goodyear taking over the reins from Ho Ching on October 1.

According to a statement released by Temasek late yesterday afternoon, the board of directors and Goodyear have "concluded and accepted that there are differences regarding certain strategic issues that could not be resolved". Hence they both decided that "it is in their mutual interests" to end the leadership transition process from August 15, at which time Goodyear will also step down from the board. Goodyear was appointed a member of the Temasek board on February 1 and CEO-designate exactly a month later.

"It is with much regret that both Chip and the board have accepted that it is best not to proceed with the leadership transition. We wish Chip all the best in his future endeavours, and are happy that Ho Ching has agreed to continue as executive director and CEO," Temasek's chairman S Dhanabalan said.

Goodyear added that he too was sorry that we are unable to continue with the leadership transition. "Temasek has a fantastic platform and I wish the board, Ho Ching and the team all the best," he said. Temasek was unable to comment on any compensation package agreed with Goodyear.

Meanwhile, Ho Ching praised Goodyear's albeit brief contribution, but left open what those "strategic issues" might be, saying that, "in the short time with us, Chip has started a number of initiatives which I believe will help strengthen the Temasek platform. I am sorry he is unable to continue with the leadership transition, and hope to complete the initiatives that he has started".

Goodyear is the former boss of leading Anglo-Australian mining group BHP Billiton, and would have been the first foreigner to run Temasek, the smaller of Singapore's government investment companies. He left BHP Billiton in early 2008, having started as chief financial officer in 1999 after a career as an investment banker at Kidder Peabody.

His appointment to head Temasek had indicated that a redirection of the firm's investment policy towards the natural resources and energy sectors was likely. But Temasek said yesterday that any inference of a change in focus had merely been a rumour, and that the fund would continue to invest in several sectors, and seek various opportunities.

But it looks as if it's back to square one for Temasek in terms of the search for a new boss. In a further statement yesterday, chairman Dhanabalan said the board, including Ho Ching, has been engaged on the issue of CEO succession since early 2005. "This involves an annual review of both external and internal candidates over various time horizons [and] Temasek will continue with this annual succession planning process," he said.

Ho, who is married to Singapore Prime Minister Lee Hsien Loong took the helm at Temasek in 2004, and had aimed to diversify the fund's portfolio with about one-third invested in Singapore, one-third elsewhere in Asia, and the rest in developed economies. A clear investment philosophy was to invest in industries which should grow in tandem with an expansion of the region's middle class, such as healthcare and education providers. Banking and telecoms also entered the fund's radar.

In the financial sector, Temasek bought a 19% stake in Standard Chartered since 2006, but it was its combined $5.3 billion investment in Merrill Lynch in December 2007 and July last year, and its £1.2 billion ($1.9 billion) investment in Barclays in 2007 that attracted most attention and which have caused the most pain. The fund made losses of more than $4 billion when it sold these stakes earlier this year.

The release of the fund's fiscal 2009 results in August will show how badly it was damaged by the collapse in stockmarkets last year. Temasek's portfolio lost $58 billion in value in the eight months to November 2008, leaving it with total assets of $84 billion, Singapore finance minister Tharman Shanmugaratnam said in May.

p/s photo: Suparksorn Chaimongkol

Sovereign Wealth Funds Are Generally Sheeps In Wolves' Clothing

Just how have the track record been for sovereign wealth funds. Temasek and GIC were path leaders for the most of last 10 years with their aggressive investing strategies. The Gulf nations SWFs only started to adopt Singapore's aggressive tactics over the last 5 years - joining in at the wrong end of the trend.

Let the record show that when these fund outperform, its largely due to momentum and bull market rallies, rather than astute stock picking. The bulk of the gains were made from telco investing in Asia, banking investing in Asia, followed by the disastrous banking investing in developed nations. For most of the last 10 years, there had been a sharp demand to bid up telco assets in emerging nations as growth prospects struggled in developed countries, thus the higher prices. Same can be said for banking stakes in emerging countries. Temasek, thanks to its connections, got in early acquiring substantial stakes in Chinese banks before they were floated. Take that factor out and you would have seen Temasek figures down the drain, literally.

The Gulf nations SWF, thanks to the surge in petrodollars over the last few years, looked to acquire significant Western assets in exchange for the petrodollars in order to make the money work for them in the future. Alas! What it did was to give back the supernormal gains to the very people who bought the oil at silly prices in the first place.

So, what went wrong? Are SWFs incapable of investing wisely? Firstly, their size makes their strategy limited. They certainly won't be considering investments that have a market cap of less than $250m, because if they do, they would be looking at a portfolio of well over hundreds of companies, how to monitor - attend board meetings also die.

Secondly, they want a substantive stake, not so much to have board seats or board control, but that to be able to influence management somewhat, to be consulted over major investing and capital decisions.

Thirdly, they tend to overpay - when you have identified a good sector or a good company, the sellers will also know its SWFs who are behind the deal, the general feeling is that they will be willing to pay a premium to get that substantial stake because they do not come around too often.

Fourthly, SWFs never seem to "walk through the data and financials" - I have mentioned this before, maybe its the fact that they are always suited up in nice executive dressing, they don't do enough "dirty work" before going ahead with a purchase or disposal. Figures and research reports are all there, and if you stop there, you risk a lot in your investments especially when we are talking about billions of dollars and a substantial stake. Its easy to talk to management, but you need to walk through the financials with a fine comb - go behind the aggregation of data, the assumptions, talk to the mid level managers and their competitors and suppliers, check with their clients, see how satisfied they are, if its a bank thats been showing tremendous growth in certain units, verify why and how that came about, go through the processes that made they stand apart from the competition. If things look too good to be true, all the more reason to look deeper.

That to me are all the main reasons why SWFs are sheeps in wolves' clothing. SWFs need to get away from pure trend investing. They need to think clearly whether to buy something for solid dividend yield protection or organic growth or growth via acquisitions. They need to think 5 years or 10 years out, which sectors would be a lot more lucrative then - I don't think telcos would be, banks would be iffy still, but commodities and food would be great. Its really simple in the end, it when you have too many suits in the room, thats what causes problems.

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Sovereign wealth funds (SWFs) were much in the news last year. As the first wave of the financial crisis hit, Gulf and Asian funds such as the Kuwait Investment Authority (KIA) and Singapore’s Temasek, ploughed billions of dollars into recapitalising prominent Wall Street institutions such as Merrill Lynch and Citigroup. At the time, with oil riding high at more than US$100 a barrel, it seemed very much as if the balance of economic power was shifting rapidly eastward. Despite the fact that their combined value accounted for only a fraction of the size of other investor classes such as pension funds or insurers, there was a brief moment when sovereign wealth was seen by some western politicians as a considerable threat to their economic independence.

The steady steamroller of the global crunch has seen those fears substantially recede. A collapse in demand from manufacturing powerhouses such as China led to a slump in the price of oil last autumn, a downwards journey aided by the exit of speculators. Furthermore, as soon as it became apparent that the instability which began in financial institutions had infected other sectors of the economy, the size of the necessary fiscal response dwarfed the capacity of anything other than a government-led rescue. With the exception of Daimler, which received a $2.7 billion (Dh9.91bn) capital injection by selling a 9.1 per cent stake to Abu Dhabi’s Aabar Investments in March, none of the recent major corporate bailouts has seen sovereign wealth riding the white horse.

As if to confirm the retreat of sovereign wealth from the basic international economic agenda, no mention of it was made in the concluding statement at the end of the Group of 20 (G20) summit of leading and emerging economies in London last month. According to German government sources, the omission was intentional.

SWFs may no longer be in the spotlight but they have not gone away; moreover, the chain of events established by last year’s backlash against sovereign wealth continues to play out. Following a degree of pressure from the US Congress and the EU, an International Working Group (IWG) of SWFs was established last October, under the auspices of the IMF. This group, which includes fund-holders such as the UAE as well as concerned inbound nations such as the US, published a series of investment guidelines called the “Generally Accepted Principles and Practices” (GAPP) – better known as the Santiago Principles after the city in which they were drawn up. The principles call for SWF investments to be based on “economic and financial grounds”, and if not, for the alternative rationale to be clearly stated.

The wording of the accompanying statement to the principles claims they are intended to ensure transparency and accountability. Yet the decision to call the document a “voluntary code of principles”, as opposed to a more binding code of conduct, is telling. According to Dr Sven Behrendt of the Carnegie Middle East Centre, a specialist in SWFs, the Santiago Principles “enable signatories to adhere to a standard, but without any monitoring or enforcement mechanisms”. The result is what Dr Behrendt calls an “unsecure document” – an agreement which is not yet sufficient to prevent unilateral action further down the line from concerned governments of nations receiving inbound investments, if and when SWFs become a political issue once more.

While the Santiago Principles may, thus far, fall short of providing countries such as the US with the guarantees they would like, according to Dr Behrendt the procedure involved to agree upon them marks an innovative concept in global governance. “The IWG reflects a bottom-up approach towards regulation, and is one of the rare occasions when industrial and industrialising nations have come together on an equal footing to agree on a set of principles”, he says. The contrast between the IWG and, for example, the Group of Seven (G7) or the Doha round of world trade talks is stark. Like SWFs themselves, the IWG represents an element of structural transition in the global economic system – one whereby the traditional power centres of the West are having to make room at the table for the growing financial clout of the East – a trend notably repeated at the G20 summit.

As if to confirm the permanence of this structural transition, the IWG is itself evolving into a permanent institution. Following the conclusion of its fourth meeting in Kuwait last month, the body announced it would form a permanent representative forum, with a secretariat to be staffed by the IMF. The forum will be chaired by David Murray, the head of Australia’s Future Fund Board of Guardians, while Bader al Sa’ad of the KIA and Jin Liqun of the China Investment Corporation will serve as deputy chairmen. Its first meeting is planned to be held in Baku this October.

If early 2008 marked the high-water point of sovereign wealth in the media eye, what will be its ultimate long-term significance as a structural element in the global financial system? For example, does it represent as fundamental a shift in the balance of power as the creation of OPEC in the 1970s?

Dr Behrendt presents three possible scenarios: first – and most pessimistic – oil prices remain so severe that funds are forced to liquidate their assets to inject liquidity domestically. This scenario would in effect mark the end of sovereign wealth as a market phenomenon. The second possibility is that SWFs remain essentially where they are, as smaller players compared with pension funds, but with the potential to create the occasional headline in sensitive markets. In this case, the permanent forum will be of most importance as a capacity building institution for the less-experienced SWFs.

The third possibility, however, is that economic recovery, and especially a recovery in the demand for commodities, results in SWFs becoming “super strong”. It is in this final scenario where the Santiago Principles, and the permanent forum, will play a significant role in reconciling the concerns of inbound nations with the demands of investors. As it currently stands, achieving such a role still requires a considerable amount of work.

Oliver Cornock is regional editor of the Oxford Business Group

p/s photo: Rita Rudani

Gov Of Singapore Investment Corp's State Of Affairs

Investors and the general public whacked Temasek and GIC royally over their portfolio losses over the past 12 months. Please search and distinguish between GIC and Temasek (you can get previous postings on that by keying in Temasek or GIC on this site's search button above). I was very severe on Temasek, and rightly so, they performed well when the wind is beneath their wings, and they made rather exceptional sector bets. For all the good brains and minds money can buy, not ONE was able to predict the banking crisis, the property loans debacle, the excessive credit card debt phenomenon, etc... That indicated to me that they just read analyst reports with no desire to walk the data (the need to go to the ground, talk to the participants and see how things were done). All they needed to do was talk to some of those new borrowers, check with ratings agencies on how they rated the papers, how did the papers got their triple A rating, etc. If you are going to invest $1bn into IOI Corp, you should not only talk to management, but walk around the plantations, see how they actually managed them, how the staff behaved, what they do to stop pilferage, how do they hedge their positions, how do they do their forward sales, how they go upstream and downstream, talk to a few of their major suppliers and clients, etc... Temasek and to a certain extent GIC, did not do the dirty work.

Again, Temasek hastily sold its Bank of America stake recently, and the share price has almost doubled what they sold at within weeks. At least GIC had the good sense to ride out bad decisions. If anything, one should be looking to buy now, not sell. Yes, they should NOT have bought before, thats too late to rectify, now they should be looking at their prospects moving forward. Unless Temasek really thinks that Bank of America has a greater chance of going to $4.00 than $25.00 over the next 2-3 years, then sell... what Temasek is doing to cutting off both limbs to get rid of an ugly mole.

Anyway, here is a more tolerant view on GIC and how they do things a lot better than Temasek. Take note of the personalities behind these two vehicles to understand the nuances in management and genuine ability.


The Government of Singapore Investment Corporation (GIC) says it will maintain its investments in Citigroup and UBS, despite the gloomy outlook for Western financial institutions.

This comes days after news that Temasek Holdings had sold its stake in Bank of America (BOA), resulting in an estimated loss of several billion dollars.

GIC currently has an 11 per cent stake in Citigroup, while its stake in UBS amounts to about nine per cent.

Observers say UBS and Citigroup have significant holdings in Asia and other high growth regions, which could recover more quickly from the downturn. And this could benefit GIC in the long term.

Arjuna Mahendran, Head of Asia Investment Strategy, HSBC, said: "By investing in these two very large investment banks, an investor who has a strategic holding in the equity of those banks would perhaps have access to the deal flow that emanates from their investment banking operations. And that is a huge positive if you are running a large sovereign wealth fund."

• GIC manages well over $100b from country's forex reserves and fiscal surplus - estimates of its assets under management range from $140- $300 bn. A plausible estimate is $220b in mid 2008
  
• Lee Kuan Yew suggested that GIC's assets had fallen by 25% from the peak and GIC invested too early in Citi and global banks. It's equity allocation has fallen to 45-50%. Other estimates suggest it lost $33b in 2008. It started to possess 7% more of cash in mid-2007
• A 25% losses would actually mean it outperformed global equity and had losses perhaps slightly less than other SWFs with similar portfolios
• Returns: It has averaged annual returns of 7.8% for last 20 years (slightly above the benchmark MSCI global with 7% returns) with Asian crisis, tech bust and credit crisis depressing returns in recent years. Average annual return in 25 years ending in 2006 was 9.5%
• Investment approach: Primarily a portfolio investor but has taken some larger stakes more recently including $6.9 b in Citigroup, Plans to increase investment in UBS in spite of losses on $10 b investment made in Jan-08; invested $1.5b in Sintonia and several property joint ventures in Europe and Asia. It is also rumored to be the lead investor in a new TPG fund. About one-third of the assets are managed by external managers, with two-thirds managed internally
  
• Investments in the U.S., EU and Japan still make up 80% of its portfolio, despite increase in exposure to Emerging markets. Equity share fell to 44% of its portfolio from about half two years ago, investments in alternative assets such as private equity and real estate rose to 23% from 20%. Cash made up 7% as of March.
• The shift to cash early in credit crisis meant it had cash on hand to invest in UBS.
• Regional: The Americas made up 40% (34% U.S.) of its assets, down from as much as 45% two years ago. Investments in Europe rose to 35% from 25%. Asia now accounts for 23% of its investments, with Japan making up almost half of them
  
• GIC: Uncertain global economic growth and financial market prospects and falling global liquidity make high returns challenging. Plans to increase investment in emerging markets via private equity funds to avoid political backlash
• Based on Singapore's balance of payment and international investment position AUM of around $220b seems plausible
• GIC along with ADIA recently agreed on code of conduct for SWF with U.S. and was a key player in IMF code of conduct: SWF decisions should be based solely on commercial grounds rather than geopolitical goals; More disclosure of strategies would reduce uncertainty and build trust; Recipient countries should have predictable, proportionate investment frameworks not protectionist barriers, nor should they seek to direct SWF investment.

p/s photo: Cherrie Ying Choi Yee

Temasek & GIC Singapore - "Cain & Abel", "Donny & Marie" or.. ?

Temasek has been hogging the headlines for the past few weeks, and seems not to be shying away from the over-exposure. First, the situation with the purchase of Thailand's Shin Corp, and before the dust even settles, Temasek announced the purchase of the much sought after 11.55% stake in Standard Chartered from the Khoo family. So what's with Temasek, and how come GIC is so laidback compared to Temasek? Ask every person in Singapore, and probably 9 out of 10 could not tell you the difference between Temasek and GIC - saying that the PM's wife (Ho Ching) runs Temasek does not count, OK! Even the rural PAS members in Kelantan know that!

Temasek is the investment arm of the Singapore government. Initially important stakes were held by Ministry of Finance (in various sectors such as shipbuilding and manufacturing). Temasek is owned by one shareholder, Singapore's Ministry of Finance. The Government of Singapore Investment Corp (GIC) invests only the government foreign reserves. Hence GIC does not have a history of building up GLCs (government linked companies) like Temasek does. So naturally, Temasek is more powerful, owing to the stable of important GLCs in its grasp. However, the big difference is that GIC acts more like a proper portfolio manager, with proper allocations into real estate, currencies, commodities and bonds while Temasek seemingly answers to no one and engages in accumulation of strategic companies.

Temasek basically rides on its hold on big and important GLCs such as Singapore Telecom, DBS Bank (involved in the recent failed bid for Korea Exchange Bank), Singapore Airlines, PSA (involved recently in the failed bid for Dubai Ports), Singapore Power, Neptune Orient Lines, etc.. Plus it also owns my favourite place in Singapore, the Zoological gardens and holds a stake in Singapore Pools, the only legal betting company in Singapore. Though more than half of Temasek's holdings are in Singapore, eventually they want to see only one-third of that in Singapore. Hence the strong investment drive to go international.

Temasek is like a fully cloaked woman, mysterious... mainly because it need not report its financials publicly. However, to satisfy the legal requirements in issuing bonds to raise money from the public, it disclosed its financials in October 2004. For year ended March 2004, it reported a net profit of S$7.4 billion on revenues of S$56.5 billion. The 2004 report stated that Temasek managed S$900 billion (US$565 billion). Standards & Poor assigned Temasek with a AAA rating.

As for GIC, it was established in 1981 to manage the country's foreign reserves. They now have 6 offices worldwide. Its assets under management is dwarfed by Temasek, holding just slightly above US$100 billion. GIC acts more like a professional investing outfit and has a very long established relationship with the magnificent investment firm, the Capital Group. The Capital Group has a remarkable track record, beating S&P 500 for each of the past 30 years in each of its 6 funds.Now the Capital Group has more than US$750 billion under management. GIC places a lot of its funds under Capital Group's management, emphasised by the fact that GIC is Capital Group's biggest single client.

After PSA's failed tussle with Dubai Ports for P&O, GIC has just stepped in with Goldman Sachs and Borealis (Canada) to launch a takeover bid for Associated British Ports for S$5.6 billion (US$3.5 billion).

There is no doubt that there is a difference in perception with regards to Temasek and GIC. GIC is viewed as a very professional portfolio manager, quiet achiever... and somehow Temasek seems to be secretive and professionally ruffling more feathers wherever it goes. It may be that Temasek is a bit too arrogant in its dealings, not taking care and time to appreciate the nuances of investing in certain companies. It may also be that the stakes Temasek has been acquiring are more strategic in nature (than GIC's more prudent value/risk/return investment process). When I say strategic, it could mean having significant exposure to the banking and telco sector of developing Asian countries, etc... Still, Temasek could do with a bit better PR, the secrecy and "not-granting-of-interviews" just adds to the fear and and unknown side of things every time Temasek steps into a country to invests. The people of that country just don't know what Temasek stands for, is it an economic conquering ship, what will their strategy be, why are foreign interests controlling important assets, etc...? When no information is available, Temasek becomes an easy target for niche groups to use Temasek as a punching bag for their own causes.

Could Have Been Better

1) Temasek could have handled the Shin Corp deal a lot better. Temasek failed to recognise the sensitivity of Thai people, the potential backlash on Thaksin, the growing tide of resentment against Thaksin - it spells of arrogance by Temasek. Instead of doing a majority sale deal, could have broken it up in 2 or 3 tranches to assuage fears. Say 20% now and another 20% 12 months later if Shin Corp meets some targets, and the balance 2 years down the road. Plus it would have given more time to find a new owner for the stake in Thai AirAsia, instead of being seen as scrambling to find a new buyer right after the deal. Since Shin Corp became a foreign controlled entity, it no longer can own the controlling stake in Thai AirAsia. Now the stake was sold (finally) to Asia Aviation. It appeared that Temasek did not realise the contravention till after the deal has been sealed. Some knuckles needed to be rapped here.

2) The visibility issue is too threatening. People not from Singapore do not differentiate between Temasek and GIC, or the GLCs of Singapore for that matter. Even though you argue till the cows come home, authorities will still regard the whole grouping as one. Hence the visibility issue, the rapid flow of deals - just makes other people nervous every time GIC or Temasek or some Singapore GLC announces a takeover deal. Having the money is one thing, being seen as "new economic lords" taking over important assets of respective countries is an issue that needs addressing. Just because Temasek is satisfied with its own investment policies and transparency issues does not mean the deals will be well received. Especially when deals are occuring within the Asian backyard. Time to be the good neighbour.

For instance, these are the big deals in recent months. Just imagine youself as a person living in an Asian country other than Singapore, how would the rapid succession of these" deal flows / failed deals" affect you, or are you unaffected by them?
- PSA tussles with Dubai Ports to buy P&O for 2 billion pounds.
- Temasek purchasing a 5% stake in Bank of China for US$1.5 billion
- Temasek purchasing a 5% stake in China Minsheng Bank
- Temasek purchasing a 5.1% stake in China Construction Bank
- GIC bidding for Associated British Ports
- The Reserve Bank of India rebuffing Temasek from raising its stake in ICIC Bank (India's largest private sector bank) because the central bank viewsTemasek and GIC as related entities, and both companies cannot collectively own more than 10% of ICIC Bank
- GIC buys the Oakwood Appartments in Roppongi, Japan. The latest addition after purchasing Oakwood Akasaka, Oakwood Aoyama and Oakwood Shirokane. GIC also owns the Shidome City Center, Shinagawa Seaside Towers and Kawasaki Tech Centre. GIC also has a US$1 billion investment in ProLogis Properties which invests in high quality logistics facilities in Japan
- GIC bought the Intercontinental Hotel in Paris for 315 million pounds. GIC also bought the prime Chifley Tower and Chifley Plaza in Sydney, and the Royal Pines Resort in Gold Coast, Australia
- GIC is a key investor in China International Capital Corp (CICC), China's first joint venture investment bank
- Temasek buying Shin Corp from Thaksin's family
- SingTel buying 32% of India's Bharti Telecom (India's second largest mobile operator)
- SingTel buying 45% of Pacific Bangladesh Telecom for US$118 million
- DBS Bank failed attempt to buy Korea Exchange Bank
- DBS Bank buying a 37% stake in Indian financial firm Cholamandalam
- Temasek buying an 11.5% stake in Standard Chartered Bank
- Temasek putting in a bid together with Blackstone Capital (Merrill Lynch now) and the Carlyle Group for a strategic stake in Air Sahara
- Temasek's failed tussle with Taishi Financial to by a 22% stake in Taiwan's investment company Chang Hwa
- Temasek tripling its stake in Pakisatan NDLC-IFIC Bank
- Temasek buying a 30% stake in Vietnam's Pacific Airlines
- Temasek buying a strategic stake in India's Mahindra & Mahindra

Is it an envy problem, I think its more than that. Singapore may think of the twin terrors as "Donny & Marie" but to the rest its a bit like "Cain & Abel" but not quite. I think its closer to "Aykyrod & Belushi"! One is saner than the other but both are still dangerous...