Temasek Launches Seatown

Ashby Monk

Temasek, the Singaporean SWF, has just announced an interesting organizational innovation. It is launching a new asset management company called Seatown Holdings (…Seatown is the English translation for Temasek…), which will be a wholly owned global investment company. In all likelihood, it will be funded out of Temasek’s recent debt issues. Here’s what we know:

According to Bloomberg: “Temasek Holdings Pte has set up a wholly owned global investment company run by its chief strategist Charles Ong that will employ a variety of strategies investing in assets ranging from stocks to bonds.”

According to the WSJ: “…people familiar with the situation said that the new company could have an investment capital of around US$3 billion which would invest in emerging markets with a focus on Asia.”

What’s going on here? Why does Temasek, an investment company, need a new investment company? There are few reasons that jump to mind:

  1. Ho Ching, Temasek’s chief executive, said in a speech last year that she envisaged opening Temasek up to “sophisticated co-investors.” Perhaps this new company is the vehicle to facilitate this co-investment.
  2. Perhaps Temasek wants to be more aggressive by diversifying into other asset classes or taking on investments that would traditionally be reserved for hedge funds (such as a long-short strategy).
  3. Related to the second point, by setting up a new “private sector” vehicle that has co-investors, Temasek (or I should say Seatown) could justify paying market rates for the best talent.
  4. Perhaps this is a tool to facilitate domestic legitimacy. Remember, Temasek had a rough time during the financial crisis. Like many SWFs around the world, it was facing a crisis of legitimacy at home.  This new entity is perhaps a way to legitimize (in the eyes of Singaporeans) some of the risky operations that Temasek wants to engage in by co-opting investors that already have attained legitimacy in the eyes of the public. If things go bad, Temasek can then point to these other, respected investors as willing participants, which could mute suggestions that Temasek itself was making poor decisions.
  5. Perhaps setting up Seatown is a way for Temasek to engage in politically sensitive investments abroad, such as in resource companies or infrastructure, without sparking geopolitical concerns. The inclusion of private investors (as well as funding from debt issues) will give Westerners considerable assurance that Seatown is investing only for profit; not for strategic, national objectives.

But this is all just speculation. Unfortunately, true to form, Temasek is keeping mum about Seatown (at least officially). So we’ll have to wait to get more details. Nonetheless, it’s a very interesting development.

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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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