Temasek’s strategic outlook extends to emerging countries

Temasek Holdings has made changes to the long-term outlook of its S$185 billion ($134 billion) portfolio reducing the asset allocation to OECD countries and adding an allocation of 10 per cent to “other geographies” including Latin America, Russia and Africa.

In a speech at a Junior Pyramid event, Ho Ching, executive director and chief executive of Temasek said the investor had been reassessing its long-term portfolio balance over the past two years, debating whether to build more exposure to Asia and add new geographic exposures.

The decision was made to reduce its OECD exposure to 20 per cent, add an allocation of 10 per cent to other geographies such as Latin America, Russia and Africa and maintain its exposure to the rest of Asia at 40 per cent and its allocation to Singapore at 30 per cent.

She said this was not a rigid target, but a re-weighting towards growth trends and changing risks over the next decade or two, particularly for Asia, and framed the decision to open an office in Mexico and Brazil last year.

Temasek’s charter, which outlines the relationship with portfolio companies and shareholders and its role as an active investor, was first published in 2002 and has been reviewed in the past three years ahead of an update on its 35th anniversary.

Up until the late 1990s Temasek’s exposure had been predominantly to Singapore, followed by a smaller exposure to OECD, with the rest of Asia receiving a small, indirect exposure through some listed property trusts.

That shifted, in line with Asia’s shifting dominance to China and India, to one third each to Singapore, OECD and the rest of Asia.

This is the latest rebalancing of the long-term portfolio.

“We invest with the appetite of a young 35 year old for growth and risk-taking,” she said.

Temasek hires 350 people globally, and its investment group is divided into broad industry groups: financial services, telecommunications, media and technology, transportation and logistics; real estate; infrastructure, industrial and engineering, energy and resources, consumer and lifestyle, private equity funds investment.

The investment strategy of Temasek centres around four themes: transforming economies, companies and industries that attract the purchasing power of a growing middle class; deepening comparative advantages of companies; and companies emerging as best in class.

In the past five years under Ho’s tenure, Temasek has introduced a number of “public markers” or milestones, including raising a 10-year bond in 2005, Ho said.

She said in the coming years, this would extend to the establishment of different tenured bonds “for a more robust and nuanced signal over the longer term”.

Ho Ching, who is married to Singapore’s prime minister and has previously been named the world’s third most powerful woman by Forbes, will remain chief executive until October when she will be succeeded by Chip Goodyear, the former boss of BHP Billiton.