Temasek Doubles Investment Activity | Chief Investment Officer

Temasek, one of Singapore’s two sovereign wealth funds, made its highest level of investment since the financial crisis last year, citing increased global opportunities.

The institution allocated S$24 billion ($19 billion) in the 12 months to March 2013, it said today in its 2014 review. It divested $10 billion over the same period to make a net $14 billion investment—double the average annual net investment level of about S$7 billion it had made over the past 10 years.

“As we mark our 40th year in 2014, we see a world increasingly transformed by ideas and innovation,” said Temasek Chairman Lim Boon Heng.

“This year has been one of our most active years for new investments—the most active since the global financial crisis—driven by softer Asian markets of interest, as well as the continued recovery of the global economy.”

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The fund, which had assets of S$223 billion at the end of March, invests predominantly in equities—both public and private—and made a 1.5% total return over the year, in Singapore dollar terms, due to a weak Asian market. Its 10-year total return was 9%.

The fund holds the majority of its assets in Asia—41% outside of Singapore and 31% in the local market—but over the last year has increased its exposure to North America and Europe from 12% of its portfolio to 14%.

“The top three sectors for investments during the year were financial services, life sciences, and energy,” the review said. It increased its holdings in AIA, the largest independent pan-Asia insurer, to more than 3.5%, as well as boosting its stake in Industrial and Commercial Bank of China. It also took a 1.1% position in Lloyds Banking Group, the largest UK retail bank by assets.

Temasek also set up an enterprise development group early last year to focus on new business development and expansion projects. This group provides growth capital to new businesses around the world.

Despite all these plans and investments, however, the level of third party help remained at 10%, the review said. Just under S$23 billion was invested by non-affiliated asset managers.

As a result, headcount at the fund has been steadily growing and by the end of March had reached 489—up from 449 in 2013 and 207 in 2004—with 20% of them based outside Singapore. This global outreach was evidenced by the opening of offices in London and New York City over the last 12 months to enable Temasek to “better access investment opportunities and further enhance our stakeholder engagement in these regions”.

The full review can be found on the fund’s website.

Moody’s Investors Service has upgraded the credit ratings of California’s two giant public pension funds, giving them higher grades than the state itself.

Both the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) moved from an Aa2 issuer rating to Aa3, the agency announced on July 7.

California’s improving balance sheet was the main driver of the upgrade, according to Moody’s rating action report, “because it increases CalPERS’ and CalSTRS’ ability to absorb funding shocks,” such as tardy employer contribution payouts.

Furthermore, recent moves to close the systems’ funding gaps helped persuade Moody’s of their robust credit-worthiness. The state legislature passed a bill last month laying out a long-term plan to bring CalSTRS to full funded status by 2046. The pension’s CEO Jack Ehnes lauded lawmakers at the time, calling it “historic legislation” that “sets the defined benefit program on a sustainable course.”

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CalPERS has raised employer contribution rates for each of the last three years to achieve a similar aim and account for longevity increases.

“While the funding ratios for both plans remain weak (70% for CalPERS and 66.9% for CalSTRS), the important steps taken by each plan to increase contribution rates are credit positive for the plans' long-term financial health,” Moody’s said.

This ratings change came as better news for the systems and state than Moody’s last action on CalPERS and CalSTRS’ credit grades. Citing “back-to-back market value declines,” in December 2009 the agency downgraded their long-term ratings from Aaa to Aa3, which persists today.

CalSTRS