Feb. 6 (Bloomberg) -- Temasek Holdings Pte said Chief Executive Officer Ho Ching will step down after almost seven years at the helm of Singapore’s $130 billion state-owned investment company.

Chip Goodyear, 51, a former CEO of BHP Billiton Ltd., will succeed Ho, wife of Singapore’s Prime Minister Lee Hsien Loong, effective Oct. 1, Temasek Chairman S. Dhanabalan said at a press conference today. Goodyear will be the first foreigner to run the sovereign wealth fund.

Ho drove Temasek’s expansion outside Singapore with acquisitions in China, Europe and the U.S., increasing financial assets to 40 percent of the fund’s portfolio. Goodyear takes over as the credit crisis ravages the value of Temasek’s investments in Barclays Plc, Merrill Lynch & Co. and Bank of China Ltd. The MSCI World/Financials Index slumped 60 percent in the past year.

“In hindsight, Temasek came in too early but it would be unfair to say Temasek made the wrong call to invest in American banks,” Francis Lun, general manager at Fulbright Securities in Hong Kong, said. “At that time it was seen as a good opportunity to invest in U.S. banks on the cheap so it would be unfair to criticize the investment officers for the decision.”

Ho, 55, joined Temasek as a director in 2002. She became executive director that year and CEO in January 2004, according to information posted on Temasek’s Web site. Ho, who said she won’t remain on Temasek’s board, told reporters today she will decide on her next career move after she resigns in October.

Sovereign Funds

Losses at Temasek and Government of Singapore Investment Corp., the nation’s other key investment company that manages more than $100 billion of reserves, were smaller than the decline in global markets last year, Finance Minister Tharman Shanmugaratnam said last month. Temasek generated annual returns of 17 percent between its inception in 1974 and the end of March.

Sovereign wealth funds in Asia and the Middle East have pumped money into global financial institutions to help replenish capital eroded by writedowns and losses. Barclays raised 5.3 billion pounds ($7.8 billion) in October by selling securities to a group of Middle Eastern investors including Qatar Holding LLC.

Under Ho’s watch, Temasek bought stakes in China Construction Bank Corp. and Bank of China, and became the largest shareholder in Merrill Lynch before its takeover by Bank of America Corp.

Mining Focus

Goodyear spent 14 years in the commodities industry and until September 2007 was CEO of BHP, where he presided over record profits at the world’s largest mining company. A former executive vice president and chief financial officer at Freeport- McMoRan Inc., Goodyear began his career at Kidder, Peabody & Co., according to information provided by Temasek today.

During his time as CEO, BHP’s stock rose almost fourfold, outpacing the MSCI Materials Index’s 83 percent advance. Between 2003 and 2007, revenue went from $15.6 billion to $47.5 billion amid record gains in commodity prices.

He holds a Bachelor of Science from Yale University and an MBA from the Wharton School, University of Pennsylvania.

“It is an interesting decision given his mining background and experience,” Charles Kernot, an analyst at Evolution Securities Ltd. in London, said by phone. “Perhaps he is going to be saying we should be looking at this a bit more, all these prices have come down maybe there is some stuff out there that is quite cheap and attractive.”

The Reuters/Jefferies CRB Index tracking 19 commodities ranging from energy to grains dropped 36 percent last year, the biggest annual decline since at least 1957.

Energy and resources accounted for 5 percent of Temasek’s investments in the year to March, down from 6 percent a year earlier, according to the company’s annual report. Investments in Singapore declined to 33 percent in the year, from 38 percent in the 12 months to March 2007.

Reviewing Candidates

The board has been reviewing internal and external CEO candidates since early 2005, and Goodyear was identified as a possible successor in 2007, Dhanabalan said. Ho’s departure wasn’t linked to the performance of Temasek’s investments, he said.

“Whether this is a way of making a change of someone who is related to the prime minister, this has been a point that I’ve dealt with since the first day Ho Ching was appointed as CEO,” Dhanabalan said. “I was very instrumental in bringing in Ho Ching and it was based purely on merit and has nothing to do with her relationship to anyone.”

Goodyear said he agreed to take the position after discussions with Ho and her team over more than 15 months.

“A combination of great foundation and wonderful set of businesses, fantastic people in the organization and footprint that we can build and grow on, that for me is certainly a win-win,” he told the press conference today.

Career Path

After graduating in 1976, Ho joined Singapore’s Ministry of Defence, where she was assigned to the Defence Science Organization, which adapted and developed weapons systems for the island-state’s fledgling military.

Ho joined a Temasek unit, Singapore Technologies Pte, an unlisted holding company for Temasek’s engineering, technology, military and property companies, in 1987. Her first job was deputy director of engineering. She rose to president and CEO before “retiring” in 2001 at the age of 48, according to her official resume. The following year, Temasek’s Chairman Dhanabalan appointed Ho as executive director.

In October 2004, Ho, who holds a Master of Science in electrical engineering from Stanford University, ended 30 years of financial secrecy at the company by publishing Temasek’s first-ever annual review.

Bank Investments

“Under Ho Ching and her leadership, our mission, our values an our strategic directions have been defined,” Dhanabalan said. “Temasek has grown into an institution sitting on a foundation of strong and diverse international talent, and firmly anchored to sound commercial principles and value creation for shareholders.”

Temasek invested about $5.9 billion in Merrill Lynch. It bought about 9 percent of the New York-based firm in December 2007 for $5 billion, or $48 a share, though its effective purchase price was reduced in July when the bank gave it a further $2.5 billion in shares. The investment bank’s shares lost 78 percent last year before the stock was delisted.

The Singapore investment company now holds about 189 million shares in Bank of America after converting its Merrill Lynch stock. Bank of America completed the Merrill Lynch purchase on Jan 1.

No Regrets

Temasek is one of the largest shareholders in Standard Chartered Plc, DBS Group Holdings Ltd. and owns stakes inIndia’s ICICI Bank Ltd. and lenders in Indonesia, South Korea and Pakistan.

Along with China Development Bank Corp., Temasek paid 3.6 billion euros ($4.6 billion) in 2007 for a 5.2 percent stake in Barclays and added another 4.5 billion pounds in June at about half the price. Barclays’ share price plunged nearly 66 percent since June.

Temasek and GIC lowered their holdings in equities “early in the crisis,” helping them post a smaller drop in their portfolios in 2008, Shanmugaratnam said.

Temasek in August said profit doubled to a record S$18.2 billion ($12.1 billion) in the year to March, as sales of energy and Chinese banking assets offset slowing returns from stock market investments.

Ho said she had been contemplating her departure since 2005 because it is important for CEOs to have a succession plan for “good governance” of their organizations.

“At this point, I’m not weighing anything that I want to do post October,” Ho said. “Is there a regret? I think if you want to run life with regrets you may end up doing very little.”

To contact the reporter on this story: Bei Hu in Hong Kong at bhu5@bloomberg.net; Yoolim Lee in Singapore yoolim@bloomberg.net

Last Updated: February 6, 2009 06:07 EST