Temasek's new chief is upbeat on long-term Chinese investments

Temasek Holdings’ newly appointed CEO Dilhan Pillay Sandrasegara said Singapore’s state-owned investment firm is committed to China despite recent developments, such as the cancellation of Ant Financial Group’s public listing.

“We’re still very positive on the long-term trajectory of China from what we can see,” Pillay said, when asked about China on Feb 9 by reporters after he was named to replace Ho Ching, who will step down in October after 17 years as head of the US$230 billion firm.

Pillay, currently head of Temasek’s international unit, will need to steer one of the world’s biggest institutional investors through markets buffeted by the coronavirus pandemic and rising political tensions between the US and China.

See: Ho Ching to step down as Temasek CEO, director effective Oct 1

Temasek is a leading investor in China with deals running the gamut from fast-growing startups and technology giants to banking institutions. In September, it said holdings in China had surpassed those its home market for the first time, hitting 29% of total portfolio value as it added to assets despite the increased geopolitical tensions.

Temasek was also an early investor in fintech giant Ant, whose record initial public offering was scrapped by regulators on the eve of the November listing.

“China has always had that long-term potential for us, going back to even before I joined Temasek to the decade where I have been very much involved in our strategy,” he said, highlighting its biotech, consumer and enterprise sectors as emerging areas of interest.

The change in leadership comes at a critical time for Temasek, which owns investments throughout the world from Chinese technology giant Alibaba Group Holding Ltd. to asset manager BlackRock Inc. Its net portfolio value fell for the first time in four years to $306 billion last fiscal year, after financial markets crashed during the early phase of the pandemic in March.

Pillay spent much of the briefing discussing Temasek’s commitment to sustainability and adapting to the impact of climate change on its businesses.

Ho, 67, who is married to Prime Minister Lee Hsien Loong, will stay in her role until October, with Pillay keeping his position as CEO of the Temasek International Pte unit after the changes take effect.

Ho’s resignation was long-expected and attempted once before in 2009 when former BHP Billiton Ltd. CEO Chip Goodyear was announced as her successor. Temasek abandoned that plan just four months into the transition, citing “differences regarding certain strategic issues that could not be resolved” while Singapore’s then-finance minister said the role would “ideally” go to a Singaporean.

Pillay, a 57-year-old Cambridge-educated lawyer, was widely regarded as a candidate to succeed Ho when he was promoted to his current role almost two years ago. The Singaporean joined Temasek in 2010, holding various leadership roles including heading the investment and portfolio management groups and overseeing the US and Americas market teams. He also initiated and led the Enterprise Development Group, helping to build new longer-term growth engines for the firm.

“I don’t see the impending changes at Temasek as having any significant near-term impact on the way Temasek Holdings is run or the way it manages its portfolio,” said Song Seng Wun, an economist at CIMB Private Banking in Singapore. “Singapore Inc. is always about continuity, but yet always on the lookout for emerging themes that can reinforce Singapore as a key hub for businesses.”

Different kind

Andrew Delios, a professor at NUS Business School, said Temasek had performed well as a steward of Singapore’s finances over the long term. Its 20-year compounded and annualized return stood at 6% as of March 2020, and has returned 14% a year since inception in 1974.

“Temasek is a much different kind of company where stability, predictability and consistency are important,” he said, while adding the views were his own. “I don’t think we’ll see any change of substance for the next two years.”

Temasek massively stepped up investing abroad under Ho. Foreign investments made up 76% of its portfolio as of March, up from 48% in 2004.

But the firm faces tremendous challenges in the years ahead. Some of its biggest assets were inherited from the state and are being pummeled by markets damped by the spread of Covid-19. Singapore Airlines Ltd. and Singapore Telecommunications Ltd., have dropped more than 25% over the past 12 months.

Some of the fund’s foreign holdings have fared better, with BlackRock up 31% in the period, and PayPal Holdings Inc. more than doubling. However, many of these are now potentially susceptible to the rift between the U.S. and China.

Ho joined Temasek in May 2002 as executive director, and was appointed CEO two years later. She started her career as an engineer and worked at the country’s Ministry of Defence, later becoming the president and CEO of Singapore Technologies Group prior to joining Temasek.