Sovereign Wealth Fund Institute

AP1 (Första AP-fonden) is one of fiver buffer funds within the Swedish national pension system. At the end of 2010, AP1 had net assets under management of SEK 218.8 billion. AP1 has been working diligently to reduce equity volatility in its portfolio. A major segment of public investors exposed to high amounts of equity had lackluster performance in 2011. According to AP1’s annual report, its equity portfolio dropped by 9.8% in 2011. AP1 is moving towards a robust approach to increase active asset allocation and shift away from passive management.

Passive equity management, although cheaper in fees, puts portfolios at possible greater risk of volatile equity market swings.

58.6% of assets are managed internally and according to AP1 management that percentage will increase. [Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

The New Mexico State Investment Council (NM SIC) has made some tactical changes to its hedge fund-of-funds portfolio exposure. It brought it down to US$ 711.2 million (December 31, 2011) from US$ 1.03 billion (December, 31 2008). As public investors become comfortable investing in hedge funds, many are investing directly with their favorite managers and lessening allocation to fund-of-funds. During the stated period above, the SIC’s allocation to hedge fund-of-funds dropped from 10% to 8%. In 2010, some fund-of-funds had been fired for poor performance.

OMERS Ventures has allocated capital to seed investments. It recently co-invested with Extreme Venture Partners, Rho Canada Ventures, BlackBerry Partners Fund and BDC in a new startup accelerator program called Extreme Startups.  The amount co-invested by all participants in total was $7 million.  Startup companies in Extreme Startups can receive up to $200,000 of investment: an initial investment of $50,000, with up to $150,000 in a convertible note provided by BDC.  Seed companies will also have access to industry partners and collaborators such as Google, Microsoft, Autodesk, RIM, Twitter, and Salesforce.com.

The New Mexico State Investment Council (NM SIC) is updating its long-term strategy for its private equity portfolio.  One major change includes committing around $350 to $450 million per year to private equity until 2016. In addition, like other public investors, the long-term strategy includes larger commitments to a smaller pool of managers, thus limiting relationships to fewer than 50 and less than 100 funds. Another big change is a shift in geographic strategy to increase allocation to emerging markets and Asia which now represents 3% of the private equity portfolio.

Three major themes:

• Focus on quality core relationships
• Bigger commitments to fewer managers
• Improve diversification by geography and strategy

NM SIC Approved Private Equity Strategy

• Venture Capital: 0% – 10% and 0 to 5 managers
• Growth: 10% – 20% and 5 to 10 managers
• Buyout: 50% – 70% and 12 to 17 managers
• Special Situations: 10% – 25% and 4 to 8 managers

*Special situations include distressed debt trading, mezzanine, energy, fund of funds and secondary strategies.

The US$ 24 billion Texas Permanent School Fund (TPSF) is currently under the Texas State Board of Education. This means all major policy, personnel and management decisions have to be made by the Texas commissioner on education. There are heavy talks to streamline bureaucracy and efficiency of having the fund be managed by a non-profit corporation.

The fund was created in 1854 expressly for the benefit of the public schools of Texas.

This non-profit corporation would have administrative and investment management control over the fund. One proposed name for the non-profit corporation is Texas Permanent Fund Investment Management Co. It would be expected the members of the Texas State Board of Education would have board seats.

In fact, this would enable the fund to operate similarly like the University of Texas Investment Management Co. (UTIMCO) which manages the endowment for the University of Texas System. In Canada and Australia, many public funds are managed by a professional public investment corporations like AIMCo (Canada) and the Queensland Investment Corporation (Australia).[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

Venture capital is a risky asset class and has left a sour taste in the mouths of many public pension funds after the 2000 bust. With that being said, several large Canadian public investors in the East are allocating small portions of assets to venture capital, even creating dedicated venture capital teams. The California Public Employees’ Retirement System (CalPERS) has grown cautious over the years investing in venture capital. At the end of last year, the CalPERS board set the target for venture capital at 1% of its alternative investment management (AIM) program. Currently, around 7% is represented by venture capital, so it will likely be years before the pension fund commits new capital to it.

Another hurdle is that the current venture industry is too small to absorb a large amount of money from CalPERS. For large public investors, $50-70 million is the minimum they would want to commit. In addition, public investors are looking to streamline and reduce their numerous relations with fund managers.

Several sovereign wealth funds invest a portion of their assets to capture and harvest the illiquid premium. Hence the improved aggregate demand for private equity, real estate, and infrastructure investments. Given their long-term nature, more and more SWFs are searching for means to capture this premium and capitalize on it.

Take for instance Europe’s largest sovereign wealth fund, the Norwegian Government Pension Fund – Global (GPFG) which allocates most of its assets into fixed income and public equities. Norway’s GPFG has greater liquidity compared to most other similarly-sized sovereign wealth fund peers, university endowments, and larger pension plans. The fund has taken strides to invest in more illiquid assets such as its gravitation towards institutional real estate.

Other SWFs have been more aggressive by using the illiquid premium such as Singapore’s GIC which makes direct company investments into companies and the Qatar Investment Authority.

Over the long haul, some studies have shown that illiquid assets can generate amazing returns; this was seen in the early endowment model that many private university endowments followed. Sovereign investors need to advance with caution as the illiquid premium cost is contingent on the liquidity demands of liabilities. Unfortunately in 2008-2009, the crisis caused severe strain and turmoil rendering some fire sales and generating losses. Illiquid assets can be a major burden for investors. Sovereign funds on the other hand, especially ones without contingent liabilities can weather out longer holding periods.

Asset allocation to private equity and other alternatives has increased tremendously in the past decade. Investors struggle to deal with legacy private equity partnerships. Many public investors have private equity funds in their portfolio that perform in the bottom quartile. These funds have a very slim chance of generating a profit, but still feed on the financial resources of investors. It also ties up asset allocation.  These “zombie funds” charge management fees until their lives expire. This is a raw deal for public investors whose returns are lessened by longer holding periods and drawn out management fees. In the end, the zombie funds must be properly put to rest or face the wrath of frustrated limited partners.[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

It is a nebulous swamp for private equity firms to navigate nowadays. Fee compression, competition from other public investors, regulatory changes, quality deal flow, and the challenge of raising non-redeemable capital commitments to new and successor private funds are just a few of the tough challenges private equity firms are dealing with. Tighter financing is crimping the buyout industry. The final slap is the anemic IPO market.  Public investors are still upbeat about private equity.  War chests are still being raised.

The model of private equity is slowly morphing, especially as sovereign wealth funds and public pension funds desire a preference to alternative private equity fund structures such as managed accounts, smaller funds, and co-investment vehicles. To go even further, increasingly several large public investors are insourcing their own investment professionals and make direct investments in alternative investments without the use of private equity advisers. Public funds that can compete with compensation packages in the private sector are more likely to build their own internal deal team. It is simple economics. In fact, they may become the private equity firm’s competitors in the long run.

With that being said, what are a few essential factors for being a successful, long-lasting private equity firm in today’s market?[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

The New Jersey Division of Investment manages the public pension fund which has around US$66 billion in assets. They have committed up to $1.8 billion in funds to be managed by the Blackstone Group. Up to US$ 1.5 billion will be placed in accounts managed exclusively for New Jersey by the Blackstone Group. Over the last twelve months, the pension fund has committed a total of US$2.5 billion to the Blackstone Group.

According to the State of New Jersey, the deal terms are expected to generate more than US$ 120 million in fee savings over the lifetime of the relationship.

The China Investment Corporation (CIC) is an investor in the Blackstone Group.

A small minority of U.S. based public investors are taking a closer look at the external CIO approach. The Alaska Permanent Fund has adopted the external CIO approach for its real return mandate. Another similar type of investment program is called absolute return management strategies. CalPERS still has an absolute return management unit, but has separated it from the public equities division. Absolute return management now reports directly under the chief investment officer of CalPERS. The overall goal of these programs is to add diversification to their portfolios and hopefully gain strategic insight from the external CIOs.[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

The China Development Bank (CDB) is a government lender owned by the Government of China. They have been a chief source of capital for international project finance deals. The CDB has already expanded into various continents such as Africa (China-Africa Development Fund), South America, and Asia. Originally founded as a policy bank to pursue the macroeconomic policies of the Chinese government, the bank is taking a different direction. It is in the evolution of becoming more like a commercial bank by increasing its role in global finance through various segments. [Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

Hedge funds have been a growing part of governmental investors’ investment portfolios, especially public pension funds. U.S. public pensions are under stress to reach targeted annual returns. Due to a low-yield environment in fixed income and other global economic factors, public pensions have had to take on more risk and increase illiquid investments to target these returns.

News today reveals that California Public Employees’ Retirement System (CalPERS) may increase or maintain current allocation to hedge fund investments next year. This was confirmed by CalPERS CIO Joseph Dear; however, the CalPERS Board will have final say which is due in late spring of 2012.

CalPERS has about a 2% allocation to hedge funds. Hedge funds have been reclassified and put under their absolute-return strategy program. Nearly 60% of its hedge fund investments are made directly through allocation to large hedge fund managers. The other portion is allocated to fund of funds for more geographically focused managers, smaller hedge funds, or emerging managers.

Richard Ingram, Executive Director

American public pension fund investors are under tremendous strain to find higher yields and higher returns. We continue to see inflows into alternative investments. Illinois Teachers’ Retirement System is making a significant push toward hedge fund investments. [Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

The Ontario Municipal Employees Retirement System (OMERS) is one of Canada’s largest public pension funds. OMERS plans to open an office in New York City as it moves further into the American private market investment sector. About 30 investment analysts specializing in private equity, real estate, and infrastructure will be staffed there.

Earlier, the China Investment Corporation (CIC) chose their North American office to be based in Ontario.

The Ontario Municipal Employees Retirement System (OMERS) is planning to launch a venture capital arm. It will be called OMERS Ventures. Already the group has made their initial venture capital investment in WaveAccounting.com, a Toronto-based firm that offers online accounting applications for small business.

According to the OMERS press release, “As a lifecycle investor, OMERS Ventures investments could range anywhere from an initial seed round investment ($500,000 to $2 million), to a larger growth capital round (up to $30 million).”

OMERS plans to invest $180 million over the next three years through this VC group. Being a long-term governmental investor OMERS could possibly outdo traditional venture capital investors by being patient and tolerant with tech companies through product lifecycles.

Significant direct investment in companies is becoming a more common occurrence for sovereign investors. Sovereign funds that have typically allocated capital to private equity firms to manage are wanting in on the deals themselves. We even find special situations in where the sovereign wealth fund takes a substantial ownership stake in the private equity firm. This benefits the private equity firm by receiving governmental capital, enhancing future fund raising prospects, and increasing firm liquidity for fund management.  Earlier this year, the Kuwait Investment Authority (KIA) and the Government of Singapore Investment Corp purchased a stake in TPG.

There is a rising trend among some large sovereign wealth funds and other long-term public pensions regarding co-investing alongside private equity funds or themselves on direct company purchases. One example includes the case of Temasek Holdings that purchased a large stake in Frac Tech Holdings alongside RRJ Capital in April 2011. Together they bought a 70% stake in the Frac Tech Holdings.[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

According to the press release, “The California Public Employees’ Retirement System (CalPERS) has invested $100 million in seed money with Breton Hill Capital, a Toronto-based global macro hedge fund with investments in equities, commodity and financial futures, and currencies.

The investment, part of the CalPERS Absolute Return Strategies program, is CalPERS first seed investment with a hedge fund manager. The pension fund also has approximately $500 million invested with customized funds of hedge funds focusing on emerging managers.

“The Breton Hill investment continues our efforts to source best-in-class investment talent,” said Joseph Dear, CalPERS Chief Investment Officer. “Our agreement creates a strong alignment of interests between CalPERS and Breton Hill, and our seed investment will add value to our portfolio as Breton Hill successfully executes its strategy.”

Breton Hill’s investment approach is based on using momentum to earn risk-adjusted returns not just in equities but in a variety of asset classes. The firm employs tactical capital allocation, security selection and an active approach to portfolio risk management to improve risk-adjusted returns.”

Read more: Press Release

The press release states, “UK Trade and Investment has today signed an agreement with the Russian Direct Investment Fund to co-operate in promoting Russian direct investment opportunities to UK based private equity and corporate investors.

The signing, by Lord Green, Minister for Trade & Investment, and Kirill Dmitriev, Chief Executive Officer of RDIF was made during Prime Minister David Cameron’s visit to Russia and took place at the Kremlin in front of President Medvedev and Mr Cameron.

Deals worth £215million were signed during the visit as well as agreements to co-operate between businesses, academia and governments.

UKTI and RDIF will jointly hold an investment conference later this year to present RDIF’s aims, objectives and investment opportunities to the British investment community.

Lord Green said: “Today’s signing is an important step in deepening even further the investment relationship between the UK and Russia.”

“There are undoubtedly huge opportunities for British funds to invest in Russia but also for Russian companies to seek investment opportunities in the UK.”

Kirill Dmitriev, Chief Executive Officer of RDIF, said:

“We are delighted that the Russian Direct Investment Fund has generated such strong support from UKTI and the British government. There are indeed huge opportunities for British firms to invest in Russia’s dynamic and rapidly growing economy, and a strong relationship between RDIF and our British partners will help facilitate that.”

Britain is the third largest foreign investor in Russia with an stock of £10bn. UK goods exports to Russia increased by 51 per cent in 2010 to £3.5bn and increased by 63 per cent to £2.1billion in the first six months of this year.”

Read more: RDIF Press Release

Fraud risk is a huge concern for sovereign wealth funds when they invest in certain investment vehicles like hedge funds or fund-of-funds.  The aftermath of the Ponzi scheme of Bernard Madoff continues to plague investors.  The trustee, Irving H. Picard is seeking to recover money for victims of the Ponzi scheme ranging six years prior to the December 2008 disclosure.

The main source of the complaint is that the Abu Dhabi Investment Authority withdrew money from Fairfield Sentry Ltd which is the largest feeder fund implicated in the Ponzi scheme.  Irving Picard is liquidating Madoff’s firm under authority of United States law to recover $300 million in redemption payments made to the Abu Dhabi Investment Authority from Fairfield Sentry in 2005 and 2006. The rational stems from the redemption payments made to ADIA were the proceeds of Madoff’s Ponzi scheme obtained from other investors or other Sentry investors.

The trustee filed a US$300 million lawsuit against the Abu Dhabi Investment Authority. There is no claim on wrongdoing on ADIA’s part.

Choi Chong-suk, the Korea Investment Corporation’s new CEO, believes the fund must allocate greater proportion to alternative and strategic investments in its portfolio. The Korea Investment Corporation was founded in 2005 by the Korea Investment Corporation Act and the SWF moved relatively faster compared to other newly created sovereign funds in deploying funds to alternatives.

The Korea Investment Corporation is on the continued path to diversify from traditional bond and equity strategies.

They have already invested in a number of direct investments and allocated funds to a number of alternative managers. In fact, the KIC was able to acquire healthy assets at discount prices due to the financial crisis. The fund aims to expand into commodities and private equity. With regards to private equity, the sovereign wealth fund focuses on global private equity funds in distressed debt and secondary strategies. Recently, the KIC has been examining growth and buyout strategies.

Lastly, the Korea Investment Corporation has signaled interest in doing deals with other sovereign investors.

When properly implemented, leverage can be a financial tool to enhance total return. A number of sovereign wealth funds employ the use of leverage in a variety of investment strategies. AIMCo (Alberta Investment Management Corp), which manages a number of governmental funds including the Alberta Heritage Fund would like more control on the amount of money it can borrow to make investments. AIMCo also manages public pension money and the Government of Alberta limits the amount of leverage pension funds can utilize in investing. [Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

Norway’s sovereign fund is prodded by some for its conservatism in investments. The sovereign fund takes small stakes by indexing companies across the globe, with a significant allocation to Europe and the Americas. Over the years, the wealth fund actively pushed to diversify from bonds to equities, and now real estate.

Norway’s SWF has also taken bets where other investors feared, such as Greek sovereign debt. Greek sovereign debt proved to be a bit risky for them; therefore, they cut their debt position in it in the first quarter.

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Hedge funds have bounced back from the doldrums of the financial crisis. The global hedge fund industry is yearning for capital inflows. With this in mind, it is becoming increasingly vital for hedge funds to understand how sovereign wealth funds operate. Major equity management and investment consulting firms have already developed so-called sovereign wealth fund account teams to handle the extra needs of them.

Not all sovereign funds invest in hedge funds or have a desire to. Newly created sovereign funds or funds that require vast amounts of liquidity shy away from these types of alternatives. As sovereign funds grow in asset size and have the ability to take on more portfolio risk, they usually see hedge funds as a possible asset class.

Hedge funds must come to a realization that receiving money from a SWF is far different than a typical high net worth client, pension fund, or insurance company. If a sovereign fund loses money being managed by a traditional fund manager with a clear defined strategy, it is easier to sell the loss story to the public. Hedge funds bear a risk connotation to them. The media and American political class has done a fantastic job on enhancing that risky black box image of hedge funds. This leads to a possible conclusion that sovereign funds that require less public accountability are also more likely to invest in hedge funds.[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

Ireland’s National Pensions Reserve Fund has helped partially stabilize and capitalize Irish financial institutions. Unfortunately, the money was not enough and the European Union and International Monetary Fund advanced more funds around November 2010. To meet the demands of the loans, the NPRF has had to sell off huge positions in its portfolio. The fund considered selling portions of its private equity portfolio.[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

Leveraged buyouts have been a popular private equity strategy for numerous sovereign funds, especially in 2007 and 2008. It proved to be so popular that sovereign wealth funds have been investing in buyout firms. The latest was a sovereign investment in TPG, a well known Texas private equity firm. Sovereign funds firmly understand that buyout funds are struggling to raise capital. The current leverage buyout market is challenging as there is a lot of dry powder available and US interest rates are very low. Private equity firm economics are not the key driver of SWF investment into buyout firms. [Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

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Sovereign wealth funds are at it again, investing directly into another private equity management firm.  [Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

According to the press release, “CITIC Capital Partners, the private equity arm of CITIC Capital Holdings Limited (“CITIC Capital”), today announces the successful closing of its second Japan buyout fund CITIC Capital Japan Partners II, L.P. (“CCJP II”) and the closing of two new investments, Higashiyama Film Co. Ltd. and Tri-Wall K.K. CCJP II has secured total capital commitments of over JPY18 billion. Similar to its predecessor fund, CCJP II targets buyouts of middle-market Japanese companies, particularly those with substantial operations or growth potential in China.

Mr. Yichen ZHANG, Chief Executive Officer of CITIC Capital, stated: ‘We are delighted by the strong support we have received from both existing and new investors. We believe their support is a validation of the tremendous investment opportunity which exists to assist outstanding Japanese companies in their international expansion, particularly to China. We look forward to continuing to build our Japan franchise and to delivering strong China value-added to our first two investments in this new fund.’”

Read more: CITIC Capital Press Release

The Kremlin wants to make Moscow into a global financial center to compete against other centers like London and New York. [Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

To read the background paper written by Brian Gibson for the SWF Summit 2011, click here

Bloomberg reports, “China’s private equity industry is “unique” because it’s dominated by the state and will follow a “different path” from overseas peers, said Xie Ping, a vice president at the nation’s $300 billion sovereign wealth fund. Entities that manage private equity in China and those that invest in such funds are primarily state-owned institutions, China Investment Corp.’s Xie said today at an event held by China Development Bank Corp. in Beijing.

The briefing was organized by the nation’s largest policy bank for its introduction of a fund that will invest in private equity. By having government backing, China’s private equity funds can increase the value of Chinese companies in which they invest, Xie said. This is an aspect of the Chinese market that is different from other countries, he said.”

Read more: Bloomberg

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The Abu Dhabi Investment Authority appoints James Kester as Chief Investment Officer for Private Equities.  Mr. Kester will be responsible for developing ADIA’s strategy in the private equity space and overseeing the activities of the private equity programme.  He will be based in Abu Dhabi and report to Hareb Al Darmaki, Executive Director of the Private Equities Department. Mr. Kester is replacing George Sudarskis, who left the SWF to start his own private equity firm, Sudarskis & Partners.

Mr. Kester joins ADIA from Zurich Asset Management in the United States, where he served as Head of Private Equity.  Prior to this, he spent 6 years as Co-CEO of Allianz Private Equity Partners in Munich, Germany.

According to the press release, “OP Financial Investments Limited (“OP Financial” or “the Group”), is pleased to announce that on 25 August 2010 a limited partnership was formed with China Investment Corporation (“CIC”), both through wholly owned subsidiaries, with the principal purpose to invest directly or indirectly in the production, processing, transportation and trade of agricultural crops on a trial basis in Kazakhstan. Total paid up capital of US$ 16.5 million was received on 21September, 2010 to fund preliminary trials. CIC and OP Financial have injected US$15 million and US$1.5 million respectively to the project, led by Zhang Weidong, Deputy CEO and head of OP Financial’s private equity team.

As the General Partner, OP Financial shall manage and introduce technology partners to the project. This is OP Financial’s second arrangement with CIC to date.

Mr. Zhang Gaobo, CEO of OP Financial, said, “We are pleased to continue our partnership with CIC with this new project in Kazakhstan. The agriculture industry is becoming increasingly important, especially in light of growing global demand for food. Kazakhstan is a leader in energy such as oil and gas, but with technology and implementation of global best practices, we believe it can be a leading player in the agri–sector as well.”

Source: Press Release

According to Business Week, “China’s $300 billion sovereign wealth fund sees a “good opportunity” to boost private-equity investments this year, as companies are undervalued after losses from the global financial crisis.

‘A lot of companies’ valuations are relatively low currently, and investors of many private-equity funds don’t have money to invest,’ China Investment Corp. Executive Vice President Jesse Wang said in an interview with the official Xinhua News Agency today that was broadcast online.

CIC had “double-digit” returns from its overseas portfolio last year, Wang said, without being specific. The company increased spending on energy and minerals assets in 2009 to profit from the global economic recovery, announcing almost $10 billion of investments in commodity-related companies.”

read more: Business Week

According to Wall Street Journal, “China’s sovereign-wealth fund has brought in a China-born portfolio manager with U.S. experience to run its hedge-fund investments, according ++to people familiar with the situation, marking its highest-profile hire so far.

Bill Lu, formerly a portfolio manager at U.S. hedge fund Tudor Investment Corp., has become a managing director at China Investment Corp. with responsibility for investments in hedge funds and hedge-fund-like investments in public-market securities, according to these people.

Mr. Lu, the third official to oversee CIC’s hedge-fund program since 2007, takes over the hedge-fund portfolio from Felix Chee, a Singapore native and former chief executive of the University of Toronto’s endowment fund. Mr. Chee is continuing to work at CIC as a special adviser to CIC’s chief investment officer, Gao Xiqing, according to a person familiar with the situation. It is unclear what prompted the change in Mr. Chee’s responsibilities. CIC’s recruitment efforts have so far focused mostly on taking staff from other Chinese government agencies to fill senior roles, hiring junior staff from investment banks to fill junior spots, and borrowing staff to fill in other gaps. Because it is state-owned, CIC isn’t able to offer salaries or bonus structures comparable to international financial firms.”

read more: Wall Street Journal

According to the article, “Seoul, is preparing to invest approximately $2.25 billion in private equity, real estate and hedge funds, the KIC’s first move into alternative investments, said Scott E. Kalb, chief investment officer. Private equity strategies will include LBO, mezzanine, distressed, growth capital and venture capital, according to the fund’s 2008 annual report.

Although KIC officials have been planning the moves for more than a year, 2008 wasn’t the right time to start making investments, Mr. Kalb said. ‘Last year was not an alpha year; it was a capital preservation year.’”

read more: Pensions & Investments

The press release states, “Temasek Capital announced that it has launched “inCube”, an innovative incubation programme aimed at helping and supporting startups, early stage and established technology companies bring their products and services to world markets. To be marketed under the brand name “inCube”, the programme will leverage on Temasek’s extensive network of companies and global business partners to offer incubatees a unique combination of seed funding, network support, facilities, management support and branding.

2 Mr Tan Soo Nan, Chief Executive Officer of Temasek Capital, explained, “We want to capitalise on the strong growth in R&D activities in Singapore as well as in other parts of the world. inCube is not just mere physical space. It allows the incubatees to interact with a suite of complementary services and affinity partners, ranging from financial management support to marketing, human resources and research institutes. What sets inCube apart from other incubators is our ability to offer incubatees access to global markets, particularly China and India, through our network of incubator facilities. inCube is therefore well-positioned to transfer new technology and business concepts into Singapore, and help Singapore companies accelerate their growth and expand globally.”

3 inCube is actively developing a global network of incubator facilities to foster synergies, and has set up three centres in three technology cities in Asia – Singapore, Chennai (India) and Shenzhen (China). There are plans to link inCube with some of the leading incubators in other technology cities in Australia, Europe, Japan, Korea and the United States.

4 For a start, inCube has signed on two incubatees: eGurkha and Bijitec. eGurkha is a software company that has developed a suite of monitoring applications which helps e-businesses to improve the reliability and responsiveness of their web sites through effective and proactive monitoring. eGurkha, which was originally based in India, is now headquartered in Singapore with subsidiaries in India and USA. inCube has made an equity investment of S$7 million in eGurkha.

5 Mr Srinivas Ramanathan, CEO of eGurkha said, “inCube, with the strong Temasek brand name behind it, will contribute significantly towards our initial marketing efforts in Singapore and the rest of Asia. Once we have developed a strong foot hold in Asia, we can then penetrate the US market with our superior features and competitive pricing.”

6 Bijitec, into which inCube has invested S$2 million, specialises in software products that enable handwritten messages to be edited and transmitted via a variety of platforms, such as personal computers, PDAs and mobile phones, including via short messaging service (SMS) on mobile phones. Bijitec’s software is especially suited for ideographic languages such as Chinese, Japanese, Korean, and other Asian and Mid-Eastern languages. Bijitec has signed a co-operation agreement with ZTE, a leading telecommunications company listed on the Shenzhen stock exchange in China. Under the agreement, ZTE will incorporate Bijitec’s software in its new range of mobile phones to be launched in 2001.

7 Mr Dave Chen, CEO of Bijitec commented, “Our target customers are the telecommunications and IT companies. With inCube and Temasek Capital as our partner, we will be able to leverage on their strong global network of telecommunications and IT industry players. This is a great boost to our growth prospects.”

About Temasek Capital

8 Temasek Capital is the direct investment arm of Temasek Holdings. Temasek Capital seeks investment opportunities around the world. Its focus is on traditional private equity opportunities, as well as early to mid-stage technology and life sciences related investments. Temasek Capital aims to be the investor of choice for companies in Singapore and overseas.”

Read more: Temasek Holdings