Singapore Prime Minister Lee Hsien Loong’s wife, Ms Ho Ching, is stepping down as CEO of Temasek Holdings after the Singapore sovereign wealth fund ran up an estimated $2 billion in losses related to its stake in Merrill Lynch, which has been converted into Bank of America stock, reports the Financial Times.
While praising Ms Ho for making Temasek the most transparent of the world’s leading sovereign wealth funds, the Financial Times says:
Temasek is expected to post possibly its worst returns since being established in 1974, after which it has generated an annual average return of about 17 percent…
Ms Ho’s departure could help deflect domestic criticism of the government as Singapore confronts its worst post-war recession, since her status as the premier’s wife closely identified Temasek with the city-state’s long-ruling People’s Action Party.
Reuters reports her "penchant for risk-taking came to the fore in 2007 with Temasek's surprise 2.1 billion pound ($3.1 billion) investment in British bank Barclays, which was locked in a costly bidding war for Dutch rival ABN AMRO in what would be the world's biggest bank takeover". It adds:
The Financial Times, which spoke to Ms Ho, reports:
She added that her appointment in 2002 was made on the condition that she would remain for at least 10 years to carry out necessary reforms to the once-sleepy state holding company.
But she also told the Financial Times that Temasek had been discussing succession planning as early as 2005 and the board had agreed that she would step down when the new CEO Charles “Chip” Goodyear could assume the post. The American former head of the mining group BHP Billiton will take charge on October 1.
The Financial Times says:
Mr Goodyear’s appointment heralds a possible change of investment emphasis for the 185 billion Singapore dollar ($124 billion) fund towards natural resources rather than financial services, a sector in which Temasek has recently made massive paper losses in banks, such as Merrill Lynch.
The move underscores the internationalisation of Temasek’s senior ranks, about 40 per cent of whom are non-Singaporean.
According to Temasek’s most recent annual report, two-thirds of its portfolio is in the financial and telecoms sectors – with just 5 per cent in natural resources.
The world’s biggest sovereign wealth funds are reported to be cutting back on equities. The Economist recently reported:
The Saudi Arabian Monetary Authority, with $500 billion-odd of assets, is being run even more conservatively than usual: between June and November the share of its funds held in gold, cash and deposits rose from 22% to 31%. The similarly sized Abu Dhabi Investment Authority has been cutting its equity allocation to the lower end of its target band of 40-55% of assets.
The Financial Times reports:
Asian dealmakers in regular contact with Temasek say it is studying a number of investment proposals in the belief that the current market turmoil provides an opportunity to buy undervalued assets.
Mr Goodyear said that, having only joined the Temasek board this week, it was premature to comment on any changes he might introduce. He had a background in mergers and acquisitions as an investment banker with Kidder Peabody before joining BHP in 1999.
S. Dhanabalan, Temasek chairman, insisted that Ms Ho’s departure was not due to Temasek’s troubled investment record over the past year.
Mr Dhanabalan said the decision to replace Ms Ho coincided with a review of Temasek’s “long-term plans under various scenarios prompted by the economic downturn”.
The board had decided that “if we are to bring in new leadership, it would be as good a time as any to involve a new leader in this review”.
Ms Ho oversaw Temasek’s rapid expansion from being a Singapore-focused investment group to one that aggressively bought assets across Asia and leading developed economies.
Only a third of its portfolio is now held in Singaporean companies, including majority stakes in the country’s dominant airline and telecoms companies.
Reuters reports:
Temasek, which had assets worth 185 billion Singapore dollars ($123 billion) as of March 2008, had 40 percent of its portfolio in financials and is nursing losses from high-profile investments in Merrill Lynch and Barclays.
Temasek's $5 billion plus investment in Merrill alone has resulted in a paper loss of more than $2 billion. Temasek currently owns 3.8 percent of Bank of America, which took over Merrill.
Under Ho's watch, the fund also made a controversial $1.9 billion acquisition of Thai telecom firm Shin Corp from the family of then prime minister Thaksin Shinawatra in early 2006 which triggered a street campaign that led to Thaksin's ouster.
The fund also got into trouble in Indonesia, where it was accused of violating competition law through its indirect control of the country's two largest mobile phone operators.
Temasek has been viewed in some quarters as too close to the Singapore government, in part because of Ho's relationship with the prime minister, making host countries wary of its investments.
Temasek controls some of Singapore's biggest companies, including Singapore Airlines and Singapore Telecommunications and has stakes in global firms such as Britain's Standard Chartered and India's ICICI.
Temasek last year said it was looking for investments in Brazil and Mexico to tap growth in Latin America's emerging economies and booming demand for commodities.
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