SINGAPORE—Singapore’s giant state investment company, Temasek Holdings Pte. Ltd., is looking to bulk up its portfolio in the U.S. and Europe, seeing opportunities in those regions despite persistent uncertainty over the health of their economies.
Louis Kwok for The Wall Street Journal
Boon Sim
In a wide-ranging interview with The Wall Street Journal at the company’s headquarters, Boon Sim, head of Temasek’s markets group and president for the Americas, outlined the investment view of the firm, which has a $155 billion portfolio.
“We are more bullish than most people” on the U.S. and Europe, he said.
The rationale behind his contrarian view? The U.S. has companies with comparative advantages in industries such as energy, health care and technology. Europe, meanwhile, is home to solid companies that operate all over the world, offsetting the impact of the continent’s dismal economies.
“The luxury for us is that we are a long-term investor,” Mr. Sim said. “We don’t have a redemption issue, so it gives us the ability to make investments in the country we like at the time we like.”
Temasek has already put billions of dollars behind these views. Last year, it invested 3.4 billion Singapore dollars (US$2.7 billion) in three North American companies—shale-energy firm FTS International, fertilizer producer Mosaic Co.
and alternative-energy firm Clean Energy Fuels Corp.
In April, Temasek was part of a consortium including Blackstone Group LP,
Carlyle Group LP
and KKR
Co. that made an offer of about US$11 billion for medical- and laboratory-equipment maker Life Technologies Corp.,
according to people with knowledge of the deal. But the attempt failed as Thermo Fisher Scientific Inc.
topped the bid with a US$13.6 billion offer.
In Europe, the strategy is to focus on companies that bring in much of their revenue from outside the continent. In March, Temasek spent US$1.35 billion to acquire a 5% stake in Repsol SA,
making the Singapore investor the fourth-largest shareholder in the oil-and-gas company, which is based in Spain but has operations in more than 30 countries including the U.S., Turkey, Japan and India. Also in March, Temasek spent US$780 million for a 5% stake in German chemicals company Evonik Industries
AG.
Sectors in which Temasek won’t invest? Urban supermarkets and other industries that are dependent on broader economic growth, Mr. Sim said.
Mr. Sim joined the firm last year after running mergers and acquisitions for Credit Suisse Group
in New York. Temasek is planning to open small offices in New York and London, with about 20 people in each. That may help determine how much the U.S. and Europe will matter to the company’s vast holdings, which, to be sure, remain firmly rooted in Singapore and Asia.
Temasek was established in 1974 with an initial portfolio of 354 million Singapore dollars (US$278 million) to support the city-state’s companies. It is now a major shareholder in Singapore’s biggest corporations, such as flagship carrier Singapore Airlines Ltd.,
PSA International Pte. Ltd., the world’s biggest operator of port facilities, and Southeast Asia’s largest telecommunications company, SingTel
.
Temasek’s second-biggest exposure is now China. The firm has spent billions of dollars in recent years to bulk up stakes in that country, especially in three major banks: China Construction Bank Corp.,
Bank of China Ltd.
and Industrial Commercial Bank of China Ltd.
Its latest annual report, for the year ended March 31, 2012, shows that Temasek’s holdings in Asia and Singapore together still accounted for 72% of the total. But that was down from 77% the year before. Exposure to North America and Europe had risen to 11% from 8%. Mr. Sim declined to give more updated figures. Temasek is due to release its report for the year ended March 2013 next month.
Mr. Sim said the company doesn’t target allocations specifically but chases good opportunities at fair prices that fit its broad investment criteria.
He said Temasek takes a long-term view of its investments and puts its money on those sectors that are a proxy for a growing middle class in “transforming economies,” such as Indonesian hypermarkets. It also looks for companies that can emerge as global players and have a comparative advantage in their industries. He cited an investment earlier this month in U.S.-based sports-apparel retailer Fanatics.com along with Chinese e-commerce giant Alibaba Group.
Temasek’s exposure to the energy and resources sector accounted for 6% of its holdings as of March 31, 2012, up from 3% a year earlier, while its exposure to the financial sector had come down to 31% from 36%. During the peak of the financial crisis of late 2008 and early 2009 the company lost billions of dollars on its high-profile stakes in Bank of America Corp.
and Barclays
PLC, which Temasek sold off in phases. People with knowledge of these deals said Temasek lost nearly US$5.5 billion.
Mr. Sim said Temasek is “cautiously optimistic” about the global economy despite the current volatility, which he expects will last for the next 18 to 24 months as the U.S. Federal Reserve starts to unwind its easy monetary policy. He also said investors need to “recalibrate” their view toward China’s prospects, from double-digit annual economic growth led by infrastructure investment, to growth in the range of 7% led by consumer spending. Even so, he said, “We are still very long-term bulls on China.”
Write to P.R. Venkat at venkat.pr@wsj.com and Paul Beckett at paul.beckett@wsj.com
A version of this article appeared June 27, 2013, on page C1 in the U.S. edition of The Wall Street Journal, with the headline: Singapore Fund On Hunt Abroad.
Singapore"s Temasek Seeks Deals in US and Europe - Wall Street Journal
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