Temasek eyes US investments to offset first portfolio drop in 7 years

[SINGAPORE] Singapore sovereign investor Temasek is set to pounce on US deals and look for co-investments with private equity partners to offset its first annual decline in the value of its assets in seven years, bankers and people familiar with the strategy said.

Temasek, one of Asia's most active state investors, has seen its nearly 16 per cent stake in London-based Standard Chartered drop 55 per cent in value over the past financial year while its Asian investments have been hit by China's economic slowdown.

The 10 per cent drop in sterling against the Singapore dollar that followed Britain's vote to leave the European Union has also depressed the value of the Standard Chartered stake.

Temasek said it will offer details of its performance when it reports results this week, as well as give some indication as to where it sees future investment opportunities.

The investor promoted former M&A lawyer Dilhan Pillay Sandrasegara as president of its international business and head of its Americas team on May 1 with a view to accelerate its investment in that region, especially in technology, consumer and healthcare, the people familiar with Temasek's strategy told Reuters.

Since the appointment, Mr Dhilan has been actively meeting companies in Silicon Valley, where he is spending a considerable part of his time every month, the people said.

"Dilhan is a very smart guy, I am sure he will hire some people and build a team," said a senior banker, who works closely with Temasek. "They have a lot of dry powder that can be deployed."

Temasek doesn't disclose its net cash position.

Last month, Temasek formed an advisory group comprising executives from global firms such as PepsiCo and Honeywell International as it seeks US investments.

Singaporean and Chinese firms make up over half of Temasek's S$266 billion portfolio. Enrico Soddu, head of data and research at the Sovereign Wealth Centre in London, expects the value of the portfolio to have fallen by 5-10 per cent from a year earlier, mainly hit by China.

This would be the first decline since 2009. The portfolio rose by nearly a fifth in the year ended March 2015.

Temasek has done few big deals in the West in recent years. It was stung by an investment into Bank of America-Merrill Lynch in the run up to the global financial crisis, an investment that proved loss-making.

This year, it sold its US$1.6 billion stake in shipping firm Neptune Orient Lines and last month pared its stake in China Construction Bank. It also invested in Alibaba and Korea's Homeplus.

But it failed to beat its own internal benchmark called 'Wealth added' in five of the last eight financial years. Temasek's returns have fallen below its risk-adjusted hurdle in five of the last, as per its last annual report.

"They are certainly recognising that they need more experience and more skill sets to invest in developed markets," said Mr Soddu.

Ten companies, including Singapore Telecommunications, DBS Group and China Construction Bank, account for half of Temasek's assets.

Temasek, the biggest shareholder in Standard Chartered, is willing to give the bank's management more time on its turnaround before taking a decision on the stake, people familiar with the matter said.

REUTERS