Temasek Holdings Pte, reeling from the aborted appointment of Charles “Chip” Goodyear, said it lost more than S$40 billion ($27.7 billion) in asset value and that the sovereign fund may allow public investment for the first time.
The Singapore investment company will seek “sophisticated co-investors” and won’t sell the “family jewels” for short-term gains, Chief Executive Officer Ho Ching, the wife of Singapore’s Prime Minister Lee Hsien Loong, said in a speech today in Singapore. Goodyear’s departure was “unfortunate” and Temasek will continue to review its succession plans, she added.
The appointment of Temasek’s first foreign CEO collapsed a week ago because of differences over strategy, raising concerns over transparency and management control after losses on Merrill Lynch & Co. and other financial investments dragged down its performance last year. Ho, who was due to step down Oct. 1, said the fund will act to enhance value over as long as 30 years and will not sell stakes “for divestment’s sake.”
“We don’t intend to raid the larder nor sell the family jewels for short-term gains,” Ho said. “We will jealously guard our interest and will invest, rationalize, consolidate or divest where it makes sense, where we can achieve clear, sustainable value.”
Ho, 56, drove an expansion outside Singapore and increased financial assets to 40 percent of a portfolio that has declined as the credit crisis drove down the value of stakes in Merrill Lynch, Barclays Plc and Standard Chartered Plc.
Last year, the fund predicted a 16 percent probability that the value of its assets may drop by more than S$40 billion in the 12 months ended March, Ho said.
“Indeed, it has turned out to be so, and more,” she said. “We are certainly not happy with the negative wealth added in March last year, as well as March this year.” The fund defines “wealth added” as returns above risk-adjusted cost of capital.
The state-owned investment company’s assets were valued at S$127 billion as of Nov. 30, down from S$185 billion at the end of March last year, the Ministry of Finance said in February.
Temasek would consider creating one more group of stakeholders over the long term, and may invite the public to “co-invest” with the company, Ho said. It may seek “sophisticated investors” in five to eight years and retail investors in the next eight to 10 years, she added.
“It is important to test this over at least one market cycle during the next five to eight years,” she said. “If this pilot is successful, we may then consider a co-investment platform for retail investors in perhaps eight to 10 years’ time.”
“Pretty huge investments”
Temasek could attract some “pretty huge investments,” though it will have to balance the interests of shareholders and the state, said David Cohen, director of Asian economic forecasting at Action Economics in Singapore.
“They’ll be subject to greater disclosure and corporate governance but that’s going to be the case going forward anyway with or without external investors,” Cohen said. “That’s the trend around the world today.”
Temasek is the biggest shareholder in five of Singapore’s 10 biggest publicly traded companies by market value, including Singapore Telecommunications Ltd., Southeast Asia’s biggest phone company, and DBS Group Holdings Ltd., the region’s largest bank by assets.
Ho said it was “unfortunate” that Goodyear didn’t take the top job, and that the succession review continues for her replacement.
“I just want to reaffirm that the decision was both mutual and amicable,” Ho said. ” We continue to hold Chip in very high regard for his professionalism and his integrity.”
Ho said financial services investments will still form part of Temasek’s core holdings. Temasek is still “fairly comfortable” in the financial services industry, she said.
The fund, in the first quarter, sold its 3.8 percent stake in Bank of America Corp., which bought Merrill Lynch, at a loss that may have totaled $4.6 billion. Temasek sold its stake in London-based Barclays at a loss in December and January, Reuters reported on June 3, citing people familiar with the matter.
Temasek was founded in 1974 to foster development of the island’s banks, airlines and ports. It owns shares of the island’s biggest bank and its largest telephone company.