Asset Management CultureMarch 2, 2020

Singapore Sovereign Wealth Fund Slices Pay Due to Virus

Even senior management at Temasek may find their bonuses trimmed as much as 15%, as investors contend with the disease’s impact.

Reported by Sarah Min

Singapore sovereign wealth fund Temasek said last week that it is freezing worker pay, even reducing bonuses for senior management, due to the coronavirus outbreak.

The state investment fund will suspend pay increases for all staff during April, though Temasek noted the raise-free period could last longer depending on market conditions. Senior management will also find their bonuses cut between 5% and 15%, depending on seniority.

Presumably, the fund, which has underperformed even before the virus appeared, is economizing with the payroll reductions as the contagion threatens to further damage its returns. In a statement, the fund said it was “sharing gains and pains alongside our shareholders.” It has linked the current pay reductions to the virus. At last count, there were 108 incidents of coronavirus in Singapore.

Senior staff workers can also voluntarily take a 5% cut to their base pay for up to one year. Temasek said it will match each dollar of proceeds to go toward the workers’ volunteer group, T-Touch, to support public health efforts worldwide to aid with COVID-19 cases.

“These actions are part of our commitment to stand as one firm in support of our portfolio companies and the wider community,” read the company statement.

It’s not the first time the sovereign wealth fund, one of two in Singapore, has implemented salary freezes. The fund also reduced wages during the SARS epidemic in 2003, when about 238 Singaporeans were infected, as well as during the financial crisis in 2008.

“Many of you were around during SARS. You know the lessons we all learnt, and they strengthened us for this threat. We are more prepared than we were in 2003,” Temasek Chairman Lim Boon Heng said at the company’s Chinese New Year Luncheon earlier this month.

“Nevertheless, Temasek and its portfolio companies must be at the forefront of our society’s response to this new threat,” he added.

Temasek is the eighth-largest sovereign wealth fund in the world with S$375 billion, or US$231 billion, in assets. But it hasn’t done well this past year. In fiscal year 2019, the sovereign wealth fund returned just 1.49% on the Singapore dollar, or -2% in US dollar terms. Longer term, for its 10-year return, the fund returned 9% in Singapore currency, or 10% in the US.

The decision to dock worker pay comes as investors worldwide grow increasingly alarmed at the spread of the coronavirus disease outside of China, where the first crop of cases surfaced. Last week, the Dow Jones Industrial Average dropped into correction territory, or a drop of more than 10%, after a jump in incidents in Iran, Italy, and South Korea.

Hong Kong’s pension warned that the outbreak will hurt its returns in 2020. In earnings calls, S&P 500 companies have started to issue lower guidance for their fourth quarters.