SINGAPORE: Amid changes to Temasek's operating landscape due to a rapidly changing world, the state investor will create three new entities to manage different parts of its portfolio from next April, its chief executive officer Dilhan Pillay announced on Thursday (Aug 28).
Doing so will allow the company to have a “sharper focus” when allocating capital, he said in a press conference with Singapore media.
The three entities will be called Temasek Global Investments, Temasek Singapore and Temasek Partnership Solutions.
Temasek Global Investments will handle global direct investments in established and emerging market leaders aligned to four trends: digitisation, sustainable living, future of consumption and longer lifespans.
As of Mar 31, this segment made up 36 per cent of the company’s portfolio value. It includes equity investment in companies such as Tencent, BlackRock and Adyen.
Head of Europe, Middle East and Africa Nagi Hamiyeh will be president of this entity, while deputy CEO of Temasek Chia Song Hwee will be deputy chairman.
Temasek Singapore will focus on active portfolio management to enhance the value of Singapore-based Temasek portfolio companies such as DBS, Singapore Airlines, CapitaLand and ST Engineering.
This segment made up 41 per cent of Temasek’s portfolio value as of Mar 31, and are long-term investments for the company.
Ms Png Chin Yee, Temasek’s chief financial officer, will serve as president of Temasek Singapore.
Temasek Partnership Solutions will manage the allocation of capital to invest in funds, build relationships with other investors. It will also work with asset management group Seviora Holdings, which is owned by Temasek Holdings.
The segment made up 23 per cent of Temasek's portfolio as of Mar 31.
This entity will not have a CEO or president for now. An operating committee has been set up to determine the strategy for the company before looking for someone to appoint as president.
“That could happen next year or the year after,” said Mr Pillay, who will be chairman of all three entities.
In response to a question on why Temasek did not embark on its reorganisation plans last year when it celebrated its 50th anniversary, Mr Pillay said the world has changed a lot since last September.
“The rules based order that we’ve been used to, that we’ve been able to rely on as an investment firm … is changing,” he said.
The US has a clear America-first objective and other countries are trying to figure out how to operate in that framework.
It remains an important market, including for capital flows, but Temasek needs to anticipate the changes on the horizon and make investments accordingly. The company also needs to look beyond Asia, said Mr Pillay.
The opportunities for growth may differ for each segment of the portfolio.
“I think the time has come for us to (have) laser-like focus for each one of them, and to go forward,” said Mr Pillay.
In his presentation, Mr Pillay noted how Temasek had stabilised its composition of the three portfolio segments over the years to roughly 40 per cent for global direct investments, 40 per cent for Temasek portfolio companies, and 20 per cent for partnerships, funds and asset management companies.
These portfolio segments have distinct attributes, from the nature of investments and how long Temasek stays invested, as well as the challenges involved.
For example, it invests in Singapore-based Temasek portfolio companies for the long term, but can sell global direct investments after just three years.
Temasek will also support the transformation of Singapore firms such as SATS and Singtel, but would not do the same for most global companies.
Mr Pillay said Temasek needs to have clear performance indicators for all three groups to achieve the overall risk-reward that is needed for shareholder returns.
"By putting these three (segments) into three different entities, we actually do have the ability to ... put more focus on each one," he said. That could be in the form of key performance indicators, expectations and allocating capital.
Each entity can also build the capabilities that it needs. He cited examples such as people who can help with operating performance, strategy consulting, artificial intelligence transformation or business development skills.
Some of these are not needed in Temasek as a whole, but will be helpful in other parts of the business, he said.
"In this world that we're going into, we need to think about that, so this structure will allow us to have that," said Mr Pillay.
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Doing so will allow the company to have a “sharper focus” when allocating capital, he said in a press conference with Singapore media.
The three entities will be called Temasek Global Investments, Temasek Singapore and Temasek Partnership Solutions.
Temasek Global Investments will handle global direct investments in established and emerging market leaders aligned to four trends: digitisation, sustainable living, future of consumption and longer lifespans.
As of Mar 31, this segment made up 36 per cent of the company’s portfolio value. It includes equity investment in companies such as Tencent, BlackRock and Adyen.
Head of Europe, Middle East and Africa Nagi Hamiyeh will be president of this entity, while deputy CEO of Temasek Chia Song Hwee will be deputy chairman.
Temasek Singapore will focus on active portfolio management to enhance the value of Singapore-based Temasek portfolio companies such as DBS, Singapore Airlines, CapitaLand and ST Engineering.
This segment made up 41 per cent of Temasek’s portfolio value as of Mar 31, and are long-term investments for the company.
Ms Png Chin Yee, Temasek’s chief financial officer, will serve as president of Temasek Singapore.
Temasek Partnership Solutions will manage the allocation of capital to invest in funds, build relationships with other investors. It will also work with asset management group Seviora Holdings, which is owned by Temasek Holdings.
The segment made up 23 per cent of Temasek's portfolio as of Mar 31.
This entity will not have a CEO or president for now. An operating committee has been set up to determine the strategy for the company before looking for someone to appoint as president.
“That could happen next year or the year after,” said Mr Pillay, who will be chairman of all three entities.
WHY NOW?
In response to a question on why Temasek did not embark on its reorganisation plans last year when it celebrated its 50th anniversary, Mr Pillay said the world has changed a lot since last September.
“The rules based order that we’ve been used to, that we’ve been able to rely on as an investment firm … is changing,” he said.
The US has a clear America-first objective and other countries are trying to figure out how to operate in that framework.
It remains an important market, including for capital flows, but Temasek needs to anticipate the changes on the horizon and make investments accordingly. The company also needs to look beyond Asia, said Mr Pillay.
The opportunities for growth may differ for each segment of the portfolio.
“I think the time has come for us to (have) laser-like focus for each one of them, and to go forward,” said Mr Pillay.
In his presentation, Mr Pillay noted how Temasek had stabilised its composition of the three portfolio segments over the years to roughly 40 per cent for global direct investments, 40 per cent for Temasek portfolio companies, and 20 per cent for partnerships, funds and asset management companies.
These portfolio segments have distinct attributes, from the nature of investments and how long Temasek stays invested, as well as the challenges involved.
For example, it invests in Singapore-based Temasek portfolio companies for the long term, but can sell global direct investments after just three years.
Temasek will also support the transformation of Singapore firms such as SATS and Singtel, but would not do the same for most global companies.
Mr Pillay said Temasek needs to have clear performance indicators for all three groups to achieve the overall risk-reward that is needed for shareholder returns.
"By putting these three (segments) into three different entities, we actually do have the ability to ... put more focus on each one," he said. That could be in the form of key performance indicators, expectations and allocating capital.
Each entity can also build the capabilities that it needs. He cited examples such as people who can help with operating performance, strategy consulting, artificial intelligence transformation or business development skills.
Some of these are not needed in Temasek as a whole, but will be helpful in other parts of the business, he said.
"In this world that we're going into, we need to think about that, so this structure will allow us to have that," said Mr Pillay.
Continue reading...