A question mark still hangs over Temasek’s performance

By Paul Mackintosh - 22/04/14

Singapore’s Temasek Holdings is much in the news at the moment. For one thing, they have just invested in a US$50 million funding around, alongside Benchmark Capital and others, for Jasper, a Mountain View-headquartered venture-backed company that produces software to manage and coordinate the so-called Internet of Things, giving their target the heady valuation of $1 billion. And they also have just launched Astrea II, “a co-investment vehicle with broadly diversified holdings in 36 private equity funds”, and a successor to their previous Astrea I co-investment vehicle, launched in 2006.

Temasek is the single largest investor in Astrea II at 38%, and according to Dilhan Pillay Sandrasegara, head of enterprise development group at Temasek: “Six high-quality and like-minded long-term institutional co-investors” are also on board. One of these, Ardian, the former AXA Private Equity spun out in September 2013, “has been appointed general partner and manager of Astrea II”. However, Temasek may look further for more investors in future.

"One of Temasek’s long held aspirations is to have long-term-minded retail investors, especially retail investors in Singapore, co-invest alongside us,” said Lee Theng Kiat, president of Temasek. “Platforms such as Astrea I and Astrea II are part of our phased approach to developing co-investment products. They help us test market interest and fine tune our thinking and product positioning for eventual participation by retail investors.”

A question mark still hangs over Temasek’s performance, though. What are all these outside investors, retail investors, and co-investors being offered a share of? What sort of rate of return are they likely to get on their investments, and how are these likely to compare with straightforward equity invesments, or even the Temasek bonds that Mr. Lee also alluded to? Temasek claims to have “delivered a record net portfolio value” for its financial year ending March 31, 2013, but its track record as an investor into private equity funds is not unambiguous.

For one thing, it simply has not had the long-term discipline of investing third-party money like a fund of funds would. This isn’t to say that its performance as a manager of those interests in 36 PE funds is especially open to question. But it’s simply not had the institutional structures and mindset of a fiduciary responsible to other major institutions. Some may argue that Temasek’s accountability to the government of Singapore equates to such a position – I don’t think so.

And also, if I were an outside investor wanting to get a slice of Temasek’s action, I would not necessarily pick its PE fund investments first. I’d be more interested in its large-scale direct investments. Those don’t seem to be on offer yet. So for the time being, I’d take a look at Astrea II more as a diversification than a yield play – unless I was misled by the SWF buzz.