Temasek Expects Smaller Industry Returns Amid Tough Years

Temasek Expects Smaller Returns Amid Difficult Years
Temasek Holdings. Photographer: Munshi Ahmed/Bloomberg

Temasek Holdings Pte, Singapore’s state-owned investment company, expects smaller returns for the asset management industry on anticipation the outlook will be difficult for years, said Gregory Curl, president and head of the Americas.

Investment returns will be lower compared with historical gains, Curl, 63, said at an industry conference in Hong Kong. The U.S. represents considerable risks, he added. Temasek managed S$193 billion ($152 billion) as of March 2011.

Temasek said June 11 the turmoil in Europe may result in a market slump rivaling the 2008 global financial crisis, creating opportunities for the company to make deals. The MSCI World Index tumbled 9 percent in May, its worst monthly performance in two years, as Europe’s debt crisis intensified, the U.S. recovery showed signs of losing steam and China’s growth slowed.

“We’re interested in sustainable returns over what we believe is going to be a very difficult and volatile environment for a number of years globally,” Curl said. “Going forward, we would expect that returns will be between one-half and two-thirds of what they have been historically,” referring to the returns for asset managers.

The company’s total shareholder return fell to 4 percent in the year ended March 2011, compared with the average of 17 percent since its inception in 1974, it said on its website.

No Position

Temasek, which sold its Bank of America Corp. shares at a loss about three years ago, said it has “no position” in the U.S. financial industry. Investments in the country are held primarily in energy and agriculture, Curl said, adding that he likes certain commodities such as copper and food stock.

Chairman Ben S. Bernanke is signaling the U.S. Federal Reserve will probably add to its record stimulus should the economy fail to make sufficient progress in creating jobs for 12.7 million unemployed Americans. The policy-setting Federal Open Market Committee yesterday extended its Operation Twist program and will swap $267 billion in short-term securities with longer-term debt through the end of 2012. Fed officials also downgraded forecasts for growth and employment while noting “significant downside risks” to the economy.

Temasek expects a protracted period of low economic growth in Europe, Curl said, adding that its investments in the region remain small. Eight percent of Temasek’s holdings as of March are in Europe and the U.S., trailing assets in Singapore and other parts of the Asia-Pacific region.

“We are still confident that the 70 percent of our portfolio that’s in Asia will perform at a level in excess of other geographies,” Curl said. Five years ago, the percentage of investments would have been close to 80 percent, he said.

China Investments

Temasek, which holds stakes in China’s biggest banks, said the nation has less policy ambiguities today than the U.S., citing policy and regulatory debates that have introduced uncertainties over investments in the world’s biggest economy. China’s banks remain useful and profitable proxies of economic growth, he said.

The investment firm said last week it filed an application to boost its quota for publicly traded securities on Chinese exchanges to tap the nation’s long-term growth. Temasek spent $2.3 billion investing in shares of Industrial & Commercial Bank of China Ltd. in April, and holds a 5.3 percent stake in the Hong Kong-traded stock of the world’s biggest bank by market value, according a statement on May 22.

Curl, once a candidate for CEO of Bank of America, is one of four presidents at Temasek. He joined the company in September 2010 after retiring from the Charlotte, North Carolina-based bank following a three-decade banking career.

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