Temasek: Crisis Management

Ashby Monk

Following on from our discussion last week, it turns out Temasek had some sound reasons for selling Barclays. The most compelling was apparently a growing fear that the UK government would nationalize the bank, leaving Temasek with nothing. According to press reports, Barclays was about to receive cash calls that would have forced the bank to seek additional capital or fail. This apparently led Temasek to sell. However, many are still asking if Temasek was correct in selling Barclays. Was the investment loss the result of an internal error?

It is hard to say. Given that the financial crisis forced what is a long-term investor (that ostensibly has an inter generational mandate) into a short-term focus (i.e. capital preservation), it is reasonable to assume that Temasek made some mistakes. Even still, given the gravity of the financial crisis at the time, selling Barclays is still justifiable. How can we blame Temasek for pulling its money out of a large financial firm just after two similar firms (Lehman and Bear) failed, leaving investors with nothing?

Still, now that the economic and financial volatility seems to have waned, Temasek should get back to thinking about the long-term. Significantly, this appears to be occurring: Chip Goodyear will apparently “seize opportunities” for strategic investments in the near future. This is where funds like Temasek have an advantage over other funds.

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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