Temasek

Few fund managers have been spared the ignominy of writing occasionally apologetic letters to investors. Temasek, Singapore’s investment agency, has an enviable track record and, with the government its sole shareholder, has rarely had to face tough public questioning. Not any more. This year it took a roasting in the normally docile local press after losing an estimated $2-4bn on its investment in Merrill Lynch/Bank of America. Now it has now taken a further estimated $800m hit on Barclays of the UK. The stakes, part of Temasek’s “strategy to invest in companies with strong comparative advantages and sound leadership”, soured alongside fears about banks’ capital positions. As Barclays’s shares plunged earlier this year, Temasek headed for the exit – a bad moment to blink. The Abu Dhabi-based International Petroleum Investment Company sat tight a bit longer and turned its £3.5bn investment into £5bn.

Clearly, the Singaporeans’ Go West policy was horribly timed. Temasek has acknowledged as much now that it is whittling back its allocation to OECD countries to 20 per cent from 30. But the agency, which celebrates its 35th anniversary this month, has other hurdles to overcome. Its enviable long-term record, generating annual total shareholder returns (TSR) of 18 per cent since inception, owes a lot to its original investments: monopolies in a rapidly industrialising island. More recent performance has faltered. The 10-year TSR, taking in the Asian crisis, drops to 9 per cent per annum. In the year to March 2008, it sank to 7 per cent; by contrast stock in Berkshire Hathaway, another big private portfolio manager, delivered returns of 23 per cent. As of November, the latest publicly available data, the value of Temasek’s portfolio was back to March 2006 levels. Chip Goodyear, who takes up the reins in October, will have his hands full.

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