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Temasek Uses SeaTown as Test for Outside Investors

Simon Israel, executive director of Temasek Holdings
“Temasek is a far more complex institution for us to engage with the public,” Israel said on Thursday. Photographer: Munshi Ahmed/Bloomberg

Temasek Holdings Pte, Singapore’s state investment company, may commit more capital to its Seatown Holdings Pte unit and push ahead with plans to invite outside investors.

SeaTown, funded with more than S$4 billion ($2.9 billion), will pursue deals with institutional co-investors in three to five years, Simon Israel, Temasek’s executive director, said yesterday at a results briefing for the year ended March 31. SeaTown, started in 2009, may add retail investors within a decade, he said.

“Temasek is attempting to reinvent itself from a passive state investor to a more co-finance-type organization,” said Jan Randolph, head of sovereign risk at economic forecasting firm IHS Global Insight in London. “In some ways it wants to dilute its sovereign wealth fund-type genetic identity by managing private funds.”

Singapore has already transformed Temasek from a passive holder of stakes in government-controlled companies to an investor with more than two-thirds of underlying assets abroad. Its Fullerton Fund Management unit invests in hedge funds, equities and bonds. The value of Temasek’s assets climbed 43 percent to a record S$186 billion on March 31, it said yesterday.

A separate unit was needed for co-investments because “Temasek is a far more complex institution for us to engage with the public,” Israel, 57, said. Planning started in 2007 when Temasek considered “opening a platform for the Singapore public to co-invest with us,” he said.

Assets Climb

“SeaTown is a test bed, if you will, to explore how this can be done in a sensible and sustainable manner,” Israel said.

Temasek, founded to help develop the island nation’s banks, airlines and ports, invests the income of the companies it owns, not government budget surpluses or oil revenue.

The company is “quite satisfied” with SeaTown’s progress since it was set up in August, Israel said. The unit makes investment decision independently from Temasek.

“Our initial commitment of S$4 billion is not insignificant and that may well change over time depending on the track record and the opportunities that SeaTown establishes,” Israel said.

Charles Ong, Temasek’s former chief strategist, is running SeaTown, while Nasser Ahmad, co-founder of New York-based DiMaio Ahmad Capital LLC, a credit hedge-fund firm, is the co-chief executive officer.

Greater Diversification

Temasek holds mainly equities and focuses on Asia, Israel said. “That leaves quite a lot in the world that we’re not focused on and also leaves quite a wide range of asset classes which we’re not necessarily engaging,” he said. SeaTown will be “more diversified in geography and asset classes.”

Asia, excluding Japan, accounted for 78 percent of the investment firm’s assets as of the end of March.

Temasek, which means sea town in Javanese, is an ancient name of Singapore dating from the 15th century.

Temasek set up SingBridge International in June 2009 to invest in and develop towns in Asia, such as the Tianjin Eco-City in China. “From time to time, Temasek seeds new businesses,” Israel said.

At a separate press briefing in Singapore, SingBridge Chairman Lim Chee Onn said Temasek has provided seed capital to fund the company for three to five years.

SingBridge said it typically co-invests with the host governments on projects. Last month, SingBridge said it expects to invest 2 billion renminbi ($295 million) for 50 percent of a 123 square-kilometer (76 square-mile) project in China.

“It may be different from investing in the stocks of a bank, but they still get the returns,” said Lim on Temasek’s shareholding. “It may take a little bit longer to achieve that return by the nature of the project, but return it must.”

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