Hyperactive Temasek plays bellwether in SWFs’ shift away from public markets

Photo: Bloomberg

Singapore state-owned investment company Temasek Holdings is leading the shift among sovereign wealth funds (SWFs) and major institutional investors away from public market investments.

Based on data from DealStreetAsia and Refinitiv, Temasek either directly or through related entities, invested in over 40 companies in the first half of calendar year 2020. That compares with around 100 in calendar 2019, the data shows.

Expand Table

Company NameIndustryLast Investment DateLocationFunding round size (Millions USD) 
BioNTechHealthcare29-Jun-2020Germany250
TokopediaConsumer Discretionary22-Jun-2020Indonesia500
Geek+Industrials17-Jun-2020China200
VinhomesReal Estate16-Jun-2020Vietnam650
JW Therapeutics Shanghai Co LtdHealthcare10-Jun-2020China100
Tropic BiosciencesRaw Materials & Natural Resources04-Jun-2020United Kingdom28.5
Fullerton India Creditfinancials01-Jun-2020India100
GenorHealthcare01-Jun-2020China160
Arterys IncHealthcare29-May-2020United States28
Ascus Biosciences IncHealthcare27-May-2020United States46
Commonwealth Fusion Systems LLCTechnology26-May-2020United States84
SQZ Biotechnologies CoHealthcare18-May-2020United States65
Shanghai Kinetic MedicalHealthcare14-May-2020China99
M17 EntertainmentTelecoms & Media12-May-2020Taiwan26.5
Pivot Bio IncConsumer Non-Cyclicals11-May-2020United States100
WangbaobaoConsumer Non-Cyclicals28-Apr-2020China14.1
Growthwell GroupConsumer Non-Cyclicals27-Apr-2020Singapore8
PreviseFinancials16-Apr-2020United Kingdom11
Elevate BioHealthcare01-Apr-2020United States170
Doctor AnywhereHealthcare31-Mar-2020Singapore27
Alan SAConsumer Non-Cyclicals19-Apr-2020France54.4
Beijing Mininglamp Software System Co LtdTechnology27-Mar-2020China300
Shanghai Abbisko Therapeutics Co LtdHealthcare25-Mar-2020China70
Diverse Retails Pvt LtdConsumer Cyclicals20-Mar-2020India110
Impossible Foods IncConsumer Non-Cyclicals20-Mar-2020United States500
Ecommerce Enablers Pte LtdConsumer Cyclicals12-Mar-2020Singapore75
Blujay Solutions LtdTechnology01-Mar-2020United Kingdom
Beijing Kaisheng Culture Media Co LtdTechnology26-Feb-2020China66
Roblox CorpTechnology26-Feb-2020United States150
Flywire CorpIndustrials13-Feb-2020United States
Iora Health IncHealthcare11-Feb-2020United States126
FNZ (UK) LtdFinancials10-Feb-2020United Kingdom
Ceva Sante Animale SAHealthcare04-Feb-2020France
Busy Bees Childcare LtdConsumer Non-Cyclicals31-Jan-2020United Kingdom
Sunseap Group Pte LtdUtilities29-Jan-2020Singapore50
Colibri SASTechnology28-Jan-2020France
Pinelabs Pvt LtdTechnology24-Jan-2020India
Califia Farms LLCConsumer Non-Cyclicals15-Jan-2020United States225
Memphis Meats IncConsumer Non-Cyclicals15-Jan-2020United States161
Global Healthcare Exchange LLCTechnology13-Jan-2020United States
Soul Machines LtdTechnology08-Jan-2020New Zealand40
ClassPass IncTechnology08-Jan-2020United States285
Transcenta Biomedical Shanghai Co LtdHealthcare08-Jan-2020China100
Source: Refinitiv, DealStreetAsia

Patrick Schena, an adjunct professor of international business at the Fletcher School at Tufts University, told DealStreetAsia in an interview that Temasek was the “flagship” of making private market investments, especially with using its own venture capital and private equity platforms.

“Temasek is also among the most sophisticated of these large institutional investors that invest in that way,” he said. Out of around 90-100 SWFs, only around the 20-25 largest invest directly in private assets in similar methods as Temasek, Schena added.

Temasek was the most active sovereign wealth fund in a period spanning the whole of 2018 and the first nine months of 2019, totting up 82 deals. In comparison, Singapore’s GIC was the second-most active, completing 58 deals. In third place was Mubadala Investment Company with 19 deals, according to data from the Sovereign Wealth Funds 2019 report published by the IE Center for the Governance of Change, ICEX, Invest in Spain, and Spain’s Ministry of Industry, Commerce and Tourism. The data followed 94 SWFs.

Schena, a co-author of the report, declined to speculate on why Temasek was so active but noted the company has “very strong capacity” for making private-market investments and “has made a conscious decision to develop that capacity.”

The top five SWFs by deal numbers – Temasek, GIC, Mubadala, Norway’s Government Pension Fund Global and Abu Dhabi Investment Authority – accounted for around 73 per cent of the volume of deals over the period, with Temasek and GIC alone making up 55 per cent, the report said.

Public market hit

As far back as 2010, an International Monetary Fund (IMF) report titled Investment Objectives of Sovereign Wealth Funds—A Shifting Paradigm noted that SWFs and other institutional investors were changing their asset allocations in the wake of the 2008 Global Financial Crisis, in part due to the hit to public equity portfolios amid extreme market ructions.

SWFs that had previously invested in alternative assets were increasing investments into that segment, the IMF report said. It also noted that funds’ geographic allocations were changing, such as Temasek’s then-plans to de-emphasise investments into OECD countries and focus on emerging markets.

Schena pointed to two main drivers of the change: First, investors are searching for yield as asset prices, particularly for real estate and in public markets, have increased, pushing funds into riskier, private assets which can benefit from an illiquidity premium.

Second, large equity markets have seen a net reduction in publicly traded securities, such as through share buybacks, he said.

In addition, with more investors willing to invest in pre-IPO companies, more companies can stay private longer, he said.

SWF shift

It is a shift that’s played out in Temasek’s portfolio, with unlisted assets accounting for around 42 per cent of its portfolio at the end of March 2019. That compares with just 23 per cent of its portfolio invested in unlisted assets as of March-end 2010.

At the end of March 2019, Temasek recorded a net portfolio value of S$313 billion, while the Sovereign Wealth Fund Institute pegged its portfolio size at $375.38 billion, excluding debt.

Temasek, which has not yet publicly set a date for the release of its 2020 portfolio performance, typically releases its portfolio estimate for the fiscal year in July. This year, some listed companies in its portfolio have delayed their results announcements due to the COVID-19 outbreak.

However, Schena said the scale of the private market transactions would make it difficult to estimate the portfolio size ahead of the report release, in part because the company may have decided to lower valuations for some of those holdings due to the COVID-19 outbreak.

Song Seng Wun, an economist at CIMB Private Banking, said his bank didn’t prepare its usual estimate of Temasek’s portfolio size for this year.

“With firms reporting a March year-end, the sharp plunge in March will have a significant impact on the valuation at that point in time,” Song told DealStreetAsia. “It’s far harder in terms of trying to evaluate the overall impact just because of that sharp market fall in March.”

In addition, the move into private assets “complicates the calculations,” Song said, adding the valuations for many of the investments aren’t known.

Song said Temasek’s shift toward unlisted assets was similar to other asset managers’ move globally to seek out yield, as the global economy was at the tail-end of a mature growth cycle and interest rates were low.

In its 2019 review, Temasek said it uses bottom-up methods for choosing investments and doesn’t have allocation targets for geographies, asset classes or sectors. During the year ended 31 March 2019, Temasek said it divested $28 billion in assets, more than the S$24 billion that it invested.

Sectoral shift

SWFs have also been shifting out of traditional investment sectors.

The top four industries SWFs targeted for investment over 2018 through the first nine months of 2019 were biotech, software, fintech and data, the Sovereign Wealth Funds 2019 report said. Mobility and e-commerce also ranked in the top ten.

While Temasek’s stake in DBS, Southeast Asia’s largest bank – and among the largest holdings in the portfolio — remained relatively stable between 2010 and 2019 at around 28-29 per cent of the bank, the allocation to financial services had fallen to 25 per cent in 2019 from 37 per cent in 2010, according to its annual report.

Likewise, energy and resources fell to 3 per cent of the portfolio, from 6 per cent in 2010.

In 2010, life sciences, consumer and real estate were classified together and made up 11 per cent of the portfolio; in 2019, that ballooned, with life sciences and agribusiness making up 7 per cent of the portfolio, while consumer and real estate grew to 17 per cent of the portfolio.

In its 2019 review, Temasek highlighted its four basic investment themes: Transforming economies, growing middle-income populations, deepening comparative advantages and emerging champions. It added those themes led to six structural trends: longer lifespans, rising affluence, sustainable living, a more connected world, the sharing economy and smarter systems.

“We seek out companies that harness technological advancements to meet the needs of demographic shifts and other changing consumption patterns,” Temasek said in the review. “Innovative companies may rapidly disrupt old business models, or create new consumption demand. We expect to reshape our portfolio increasingly in line with these trends.”

In a September 2019 note, S&P Global Ratings said Temasek’s credit quality hadn’t changed, even with more unlisted assets in its portfolio. While the unlisted investments weakened the portfolio’s liquidity, that was offset by increased diversity and a lower concentration of key assets, the note said, adding that the large listed Singapore-based holdings may be less liquid than the listed status suggests.

Temasek’s top three assets made up 19 per cent of the portfolio in fiscal 2019, down from 25 per cent five years ago, S&P said.

Valerie Law contributed to this story.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.