FEB 9 – Singapore shook up management at Temasek Holdings Pte Ltd, replacing a member of the city-state’s founding family with a US-born outsider charged with helping the roughly US$134 billion fund deal better with world economic doldrums.
The move makes Temasek – one of the world’s oldest and most respected sovereign-wealth funds, with substantial stakes in financial giants like Bank of America Corp. and Bank of China Ltd. – the latest big government-owned investor to change gears after big hits to its portfolio.
It also raises the potential for Temasek to become a bigger player in the slumping market for natural resources.
Temasek said US-born Charles “Chip” Goodyear, former chief executive of mining-and-resources giant BHP Billiton, would take the driver’s seat in October. He will succeed Chief Executive Ho Ching, who is married to Singapore Prime Minister Lee Hsien Loong and is daughter-in-law of the founder of independent Singapore. Ho also will step down as a director, Temasek said, and it isn’t clear what her next move might be.
Like other big investors around the world, Temasek has sustained several investment hits, including paper losses of US $2.3 billion from its investment in the former Merrill Lynch, according to people familiar with the matter.
The fund also led a controversial $3.8 billion takeover three years ago of Thailand’s Shin Corp. from the family of then-Thai Prime Minister Thaksin Shinawatra. Protests in Thailand against the transaction contributed his overthrow in September 2006. Shin’s current market capitalisation is about $1.6 billion.
On Friday, Temasek Chairman S. Dhanabalan said its management change is “absolutely not” related to either the recent financial hits or the Shin investment. He also said it has nothing to do with her being married to Singapore’s prime minister. Dhanabalan said he was “very instrumental” in Ho’s appointment as Temasek CEO, which was “purely on the basis of merit and not her relationship with anyone.”
Temsek officials said the fund first became interested in attracting Goodyear in 2007. A person familiar with the matter said Temasek had been searching for a successor since before some of the biggest hits to investor portfolios around the world.
But the company also signalled Friday that Goodyear would take part in a strategic shift. “The team has already embarked on a different stance since mid-2007 and has begun to review its long-term plans under various scenarios prompted by the economic downturn,” Dhanabalan said. “The board is of the view that, if we are to bring in new leadership, it would be just as good a time as any to involve a new leader in this review.”
“Chip has capabilities that I don’t have,” Ho said.
The company declined to specify details of the stance-change. But the 51-year-old Goodyear, a former associate at Kidder Peabody, brings familiarity with both commodities and finance.
Despite interest, Temasek hasn’t made a big dive into commodities because prices were so high, according to a person familiar with the matter.
The management moves comes at a time of soul-searching for a number of sovereign-wealth funds. The twin booms in energy and exports filled coffers in the Middle East and Asia, making the funds increasingly important players on the financial scene. Getting a sense of their size is difficult because many don’t offer details, but one US government estimate put their size at $2.7 trillion to $3.2 trillion in assets, with the potential to expand to as much as $13.7 trillion by 2017.
But a number have had investment hits since, leading to caution in a time of a global need for capital.
The hits “reinforced a lot of people’s beliefs that state investment decisions should be left in the hands of financial professionals and not governmental authorities,” said Carl Linaburg, vice president and co-founder of SWF Institute, an organization that tracks sovereign funds.
China Investment Corp. paid $3 billion for a 10% stake in Blackstone Group LP just ahead of its initial public offering in June 2007, then in October reached a deal that allowed it to lift the stake to 12.5%. Blackstone’s shares have fallen from a debut of about $35 a share to $5.37 Friday.
In December, CIC Chairman Lou Jiwei said the fund’s directors “don’t have the courage” to invest in the developed world’s financial institutions any longer.
A number in the Middle East have stepped back as well. In the past 18 months, the Abu Dhabi Investment Authority, which invested $7.5 billion in Citigroup Inc. in late 2007, has moved to a more conservative investment approach. Sameer Al Ansari, chief executive of Dubai International Capital, recently suggested he isn’t investing at all.
Temasek, which five years ago had no offices outside of Singapore, has been selling some Asian assets, setting up outposts in Latin America and buying into Western banks. Temasek’s net profit doubled to 18.2 billion Singapore dollars (US$12.82 billion) for the year ended March 31, 2008.
Under Ho, the fund has been hiring Western executives for a number of years. Temasek has said its 350 or so employees come from 22 countries, and more than 40% of its senior management is non-Singaporean. – The Wall Street Journal Asia
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