Temasek International Chief Executive Officer Dilhan Pillay said the past year had shown it was almost impossible to accurately predict geopolitical events.
INGAPORE: Temasek International Chief Executive Officer Dilhan Pillay says the S$313 billion ($230 billion) investment firm will be more cautious when investing in the public markets this year as it increases bets on unlisted companies globally.
In his first interview since taking over the role in April, Pillay told Bloomberg Television that the past year had shown it was almost impossible to accurately predict geopolitical events. About 42% of the Singapore government-backed investor’s assets were held in unlisted businesses as of March 31, up from 39% a year earlier.
"This year of course we will think more carefully about how to invest in the public markets if the volatility in the public market continues,” Pillay said, adding that backing private companies often meant less instability.
"If we invest in good private companies, the volatility is reduced.” He said volatility for unlisted companies wasn’t necessarily "public-market-pricing volatility or sentiment volatility,” rather more around business risks.
Temasek unveiled a modest 1.6% gain in net portfolio value for the 12 months through March 31 on Tuesday amid a challenging environment that includes the stop-go trade war between China and the U.S. as well as other potentially disruptive events like Brexit.
Singapore’s sovereign wealth fund GIC Pte last week said overhyped valuations in developed markets are also a concern. In U.S. dollar terms, Temasek’s portfolio value fell by 1.7%.
Divestments of S$28 billion as U.S. equity markets hit record highs, and a solid performance from its collection of unlisted assets, were key to Temasek holding on to its portfolio gains.
Pillay also played down the idea Temasek was driving its investee companies to consolidate. In January, developer CapitaLand Ltd. struck a S$6 billion deal to buy Temasek units Ascendas Pte and Singbridge Pte.
While bringing companies together can help with certain issues such as attracting talent, he said it could also backfire and cause pain for managers.
"If you consolidate companies just for the sake of size you have to watch out,” Pillay said. "Because scale is no doubt important. But allocation of capital correctly is much more important. So if you’re consolidating, you’ve got to ask yourself ‘Are you going to become a better company?’.”
London-based Sovereign Wealth Center’s head of data and research Daniel Brett said the coming year would be full of challenges for Temasek, from the trade war to Brexit and a potential crisis involving Iran. But he predicted the Singapore investor would use any economic downturn to snap up assets at discounted prices.
"Temasek will be seeking opportunities to generate long-term yield and it may also have more time to prepare,” Brett said after the release of the firm’s annual report Tuesday. "The fact that it beat more pessimistic expectations suggests it’s adapting well to a challenging environment.” - Bloomberg
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