Temasek Restructures, Loses Americas Chief

Chia Song Hwee, Temasek (Art by Edward Kinsella)Singapore sovereign fund Temasek International is reorganizing its management structure to prepare for “challenging global times,” the fund announced Tuesday.

The S$266 billion (US$197 billion) fund said it has appointed Chia Song Hwee and Dilhan Pillay—current joint heads of investments—as presidents.

Dilhan will also take over as head of Americas from Boon Sim, who will be leaving May 1 after four years, Temasek confirmed. Boon—who previously led Credit Suisse’s global mergers and acquisition team—will continue as an advisor, mainly helping to build the fund’s US presence.

“Boon had indicated his desire to relinquish his executive position since the end of last year for personal and family reasons,” the fund said in a statement.

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Temasek will also combine its sector and market investment teams under a single investment group and institute a new portfolio strategy and risk group to “better position ourselves in light of dynamic market conditions.” It will also create a sustainability and stewardship team, as well as promote four staff members to senior managing directors.

“Temasek thinks long term and acts as an owner in all that we do,” said CEO Lee Theng Kiat. “At a strategic level, the changes we’re making position the organization to protect and work the Temasek portfolio, and continue to build capabilities as we grow.”

Lee added that Temasek aims to “further build agility, alignment, and accountability,” as part of the fund’s globalization.

Temasek’s neighbor fund GIC also announced a management reshuffle last week in anticipation of “an investment environment of lower returns, increased volatility, and greater uncertainty.”

GIC named Group CIO Lim Chow Kiat as deputy group president, and President of Public Markets Jeffrey Jaensubhakij as deputy group CIO, effective June 1.

The sovereign fund created five new CIO positions to oversee each of its main asset classes.

Dealing with funding shortfalls will require greater risks, but many pension professionals are worried their funds don’t have the knowledge base needed.

Pension fund boards may lack knowledge of the risks to their portfolios even as they seek to take on more risk in search of greater returns, according to a State Street survey.

“Pension funds will need to develop their in-house risk expertise to assert greater control over increasing risk exposures.”More than a third (36%) of 400 pension professionals from around the world surveyed by the investor services giant said their funds had funding issues requiring greater risk-taking. However, of those people, less than half (43%) said their boards had a “high level of understanding of risks” to their funds. Just 29% of those whose funds were seeking to lower risk said their boards had sophisticated expertise.

“We examined pension funds’ capabilities across four distinct types of risk: investment, liquidity, longevity, and operational risk,” State Street wrote. “For each of these areas, only one-fifth of funds at most consider their risk management to be very effective.”

Large funds were generally better at risk management than small funds, the survey found, while public funds were better than their private sector counterparts.

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“Pension funds will need to develop their in-house risk expertise to assert greater control over increasing risk exposures,” State Street said.

On top of in-house capabilities, the firm added that risk management support from third parties was “unlikely to diminish.” More than a quarter (27%) of respondents said they planned to increase the number of external consultants they use over the next three years, the survey found.

“This support will be particularly important in areas where funds lack specialist expertise, or cannot afford to implement the required risk tools in-house,” State Street reported.

A significant proportion of respondents said their employers planned to change the process for recruiting new board members in order to improve their expertise. More than half (53%) of those funds seeking to increase portfolio risk said this was the case.

Barbara Creed, chair of the trustee board at the New York-based Church Pension Fund, told State Street’s researchers that her fund was “embarking on further education that will involve bringing in outside experts for informal gatherings with our trustees to talk about cutting-edge issues in investments, in pension plan design, and so on.”