Heliconia Capital Management, a unit of Temasek Holdings, is launching a new fund with a corpus of up to S$600 million ($422 million) in government capital that will be co-invested with Singapore-based enterprises in a new International Partnership Fund (IPF).
This is aimed at helping Singaporean enterprises expand abroad and internationalise their business operations.
With its focus on Asian markets, its policy of joint investment means that local firms can partner other Asian companies to engage in activities such as extending product lines, brands or value chains, or otherwise gaining access to markets, channels and technologies.
The criteria will see Singapore-based firms needing to be headquartered in the city-state and post annual revenues no higher than S$800 million ($564 million). This places their investment focus firmly on middle market enterprises. According to a Divestopedia article, middle market enterprises are those companies whose annual revenues could be in the range of $5 million to $500 million or from $100 million to $1 billion.
Conceptually, a broad definition places middle market companies as companies with revenue of between $5 million to $1 billion in revenue; this is between main street companies who post below $5 million in revenue and large multinational corporations (MNCS) who post over $1 billion in revenue.
However, a report by The Business Times notes that a deficit of details on the fund has led to uncertainty by analysts and association heads regarding target enterprises, its specific investment thesis and general investment philosophy.
In an exchange with The Business Times, Suan Teck Kin, senior economist at UOB, explained: “It’s too early to say as we do not have much details on the IPF yet. However, this could be the first such ‘co-investment’ scheme by the Singapore government to help companies to internationalise. As the IPF scheme is through equity investment and will therefore have a higher risk exposure, eligible companies will likely be those that are deemed to have immense potential but lack capital to grow or scale.”
Meanwhile, Kurt Wee, President of the Association of Small and Medium Enterprises (ASME), remarked in a contrarian view: “My sense is that the fund is more targeted at bigger and more established companies. It’s picking the winners instead of providing support for the smaller SMEs to go overseas.
“Broad-based internationalisation schemes continue to elude SMEs. The government is often of the perspective that if you are a more substantial size, you are more ready to go overseas, but we don’t feel that. Even smaller, less-established SMEs are capable of going into the region,” he added during the exchange.
The focus of the fund reflects a pragmatic approach by the city-state’s government in concentrating on enterprises with scale. Investments in such ventures have a greater chance of generating returns and possessing the business operating systems that can sustain an internationalisation effort.
Singaporean SMES can access existing schemes from IE Singapore such as the Global Company Partnership Grant. These measures will complement work by an associated company of Temasek Holdings, Clifford Capital, which was incepted in 2012 to finance overseas projects by Singapore companies. To date, over S$2.4 billion has been committed to internationalising Singaporean businesses.