Sovereign Wealth Fund Institute

Singapore’s Temasek Holdings is stepping up investment activity in the North Asia region. It created Pavilion Capital Pte, a wholly owned company to invest in closely held companies and will focus on small and medium enterprises in China. The new entity will be run by Tow Heng Tan, its former chief investment officer and senior managing director (Investments) of Temasek Holdings covering initiatives for direct investments.. Mr. Tow Heng Tan joined Temasek Holdings in 2002 and became the chief investment officer in October 2007.

By creating this sovereign wealth enterprise, it will give Temasek additional organizational flexibility to access direct company stakes the region.

According to a statement sent out by Temasek Holdings regarding Pavilion, is that it will “complement and expand our coverage and capacity for North Asia, including China.”

On December 8, Singapore’s Temasek Holdings raised 500 million in SGD from the sale of 2-Year zero coupon bonds. These bonds are exchangeable into shares of Hong Kong-listed supply chain manager Li and Fung. Temasek has issued exchangeable bonds through its holdings in Standard Chartered Bank shares.

According to the press release, “Avolon, the international aircraft leasing group, today announces that it has successfully secured a third round of equity capital with a US$300 million equity commitment from the Government of Singapore Investment Corporation (‘GIC’), subject to customary regulatory approval.”

The press release further states, “Avolon announces a US$300 million equity capital commitment from GIC, a leading sovereign wealth fund, subject to customary regulatory approval. Avolon has now secured a total of US$1.4 billion in equity capital from GIC and leading private equity firms, Cinven, CVC Capital Partners and Oak Hill Capital Partners. The equity commitment from GIC adds geographic diversity to Avolon’s capital base and enhances its ownership structure. GIC joins leading private equity firms Cinven, CVC Capital Partners and Oak Hill Capital Partners as equity investors in Avolon with each bringing significant experience and complementary strengths to the Avolon business.”

Read more: Press Release

In recent months, the value of American luxury hotel and resorts in key markets has been slowly increasing due to higher occupancy coupled with improved room rates. Recently, a group affiliated with Paulson & Co. won a United States court battle against the Government of Singapore Investment Corporation (GIC). The court battle was over control of a portfolio of American luxury hotel and resorts.[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

The press release states, “the report presents the performance of the funds under GIC’s management. The 20-year annualised real rate of return is the key focus for GIC as it is our mission to preserve and enhance the international purchasing power of the reserves. Starting this year, GIC is also publishing the 5-year and 10-year nominal rates of return to provide a sense of the on-going medium-term investment performance, even while GIC maintains its sights on the long term.”

Read more: GIC Press Release

According to the press release, “Khazanah Nasional Berhad (“Khazanah”) and Temasek  Holdings (Private) Limited (“Temasek”) are pleased to announce the establishment of M+S Pte Ltd (“M+S”) and Pulau Indah Ventures Sdn Bhd (“Pulau Indah”).  Owned 60:40 by Khazanah and Temasek respectively, M+S will develop land parcels in Marina South and Ophir-Rochor in Singapore. Pulau Indah, a 50:50 joint venture between Khazanah and Temasek, will develop projects in Iskandar Malaysia in Johor.  These joint developments were supported by the Prime Ministers of Malaysia and Singapore in their Joint Statements of 24 May 2010, 22 June 2010, 20 September 2010 and 27 June 2011.

M+S develops two key sites in Singapore

M+S Pte Ltd will develop four land parcels in Marina South and two land parcels in Ophir Rochor, each as an integrated development.  An indirect wholly-owned subsidiary of UEM Land Holdings Berhad (“UEM Land”), a real estate company within Khazanah’s portfolio, and an indirect wholly-owned subsidiary of Mapletree Investments Pte Ltd (“Mapletree”), a Temasek portfolio company, have been appointed to oversee the marketing and development of the project at Marina South.  For the Ophir-Rochor site, UEM Land and an indirect wholly-owned subsidiary of CapitaLand Limited (“CapitaLand”), another Temasek portfolio company, have been appointed to oversee the marketing and development.

Khazanah and Temasek are both committed to the successful commercialisation of these land parcels, which will include office, residential, hotel and retail components.

The gross development value of the project with a permitted gross floor area (“Permitted GFA”) of up to 501,020 sqm is estimated at approximately SGD11 billion (RM27 billion), subject to design and development plans.

Pulau Indah develops two new sites in Iskandar Malaysia

Khazanah and Temasek have worked together since last May to identify suitable sites in Iskandar Malaysia for joint commercial development. Two sites, one in Medini North and the other at the Heritage Cluster in Medini Central, have been confirmed.

Pulau Indah intends to develop serviced apartments, a corporate training centre, and commercial, retail, residential and wellness-related offerings on these sites. Khazanah and Temasek are currently in discussions and negotiations with potential partners and operators for the various components to maximize the commercial potential of the location.

The gross development value of the Iskandar project with a Permitted GFA of up to 1,365,675 sqm is estimated at approximately RM3 billion, subject to design and development plans.

Planning and design works for the projects had commenced in 1Q/2011.  With the signing of these agreements today, the projects will move towards design and further implementation and delivery of the initial phases over the next five years.

Khazanah’s Managing Director, Tan Sri Dato’ Azman Hj Mokhtar, said: “We are honoured to be undertaking these exciting developments at these key sites in Singapore and Iskandar Malaysia with our counterparts from Singapore, Temasek Holdings.  The development in Iskandar with Temasek will be highly complementary and builds on the momentum of existing and planned projects in Iskandar Malaysia, in which Khazanah has been involved since 2006.  Both these projects mark our first joint development investment with Temasek, and we look forward to a strong and fruitful partnership in both Singapore and Iskandar Malaysia.”

Ms Ho Ching, Executive Director & CEO of Temasek, added: ‘Both the Khazanah and Temasek teams put in tremendous effort, working very closely together to develop the best ideas possible for our joint projects. We were also very fortunate to have the expert and highly professional support of leading real estate companies like UEM Land from Malaysia as well as Mapletree and CapitaLand from Singapore. I am also especially grateful for the guidance, advice and support of very experienced industry leaders who will guide the Singapore developments as key Board members of M+S.  I look forward to the successful development of the projects both in Johor as well as Singapore.’”

Source: Khazanah Nasional Press Release

The Government of Singapore Investment Corporation and the Australand Property Group have created a logistics joint venture called Australand Logistics.  The real estate joint venture will invest in industrial assets and will have a target investment size of AUD$450 million.  The initial term of the JV is 5 years and is expected use very little to no debt in its strategy.  The initial portfolio holds six completed assets and two properties under development in Australia.  The total value of completion is around AUD$220 million.[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

Tan Jee Say

Many sovereign wealth funds have the visible stress of managing overseas investments while properly communicating to the local citizenry on relevant updates. Most of the time, local citizens want to ensure the money is spent on reliable investments. This is why a number of sovereign funds become hesitant or have name-brand-selection bias when choosing investments. [Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

Historically, investment access to India’s equity markets has created several problematic issues and headaches for sovereign wealth funds. Currently, sovereign wealth funds are grouped under the category foreign institutional investor or FII defined by the Securities and Exchange Board of India (SEBI).

A few current sovereign-entity FIIs registered include:

• Abu Dhabi Investment Authority
• Abu Dhabi Investment Council
• Australian Future Fund
• Provincial Government of Alberta (AIMCo)
• China’s National Social Security Fund
• Fullerton Fund Management Company LTD (SWE of Temasek Holdings)
• Kuwait Investment Authority
• New Zealand Superannuation Fund
• Norges Bank
• Queensland Investment Corporation
• Singapore’s GIC

Sovereign entities can also invest as a Foreign Venture Capital Investor. FII’s are under strict regulation and cannot hold large positions in listed Indian companies. Times have changed, India wants to increase foreign investment in companies and attract foreign capital. There is a heavily-debated plan underway to create a new defined class of investor for sovereign funds which will be fundamentally different from the FII classification. This new proposal for sovereign funds would allow them to hold a much larger stake at 20% compared with 10% for a publicly traded Indian firm. The plan must be approved by SEBI and receive permission from the Reserve Bank of India. India’s fear was that foreign governments could create numerous sovereign entities to bypass the 10% rule and thus effectively control the company for geopolitical reasons.

Recently, the Government of Singapore Investment Corporation opened up an investment office in Mumbai. This was after India and Singapore signed a Comprehensive Economic Co-operation Agreement (CECA). The Indian Government would also treat Temasek Holdings and GIC as separate investors, not acting in concert in potential large stake undertakings. Sovereign wealth funds are warming to investing in the Indian equity markets as the Government of India begins to warm up to foreign investments.

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.]

Tony Tan

The press release states, “GIC officially opened its India office in the city of Mumbai on 31 March 2011. This is GIC’s eighth overseas office outside Singapore. GIC’s India office will be headed by Mr Kishore Gotety. The office will be made up of more than 10 investment and asset management professionals. The team aims to foster close relationships with key Indian partners who share GIC’s values as a responsible and long-term investor.

GIC Deputy Chairman and Executive Director, Dr Tony Tan, said, ‘GIC has been amongst the earliest institutional investors in emerging Asian markets. In India, GIC has been investing across the public and private markets since the early 1990s. The setting up of the India office demonstrates GIC’s commitment to secure a larger role in the Indian growth story.’”

Read more: GIC Press Release

According to the press release, “Jefferies Group, Inc. and the Government of Singapore Investment Corporation (GIC) announced today that, through affiliates, they and LoanCore LLC, led by Mark Finerman, have formed Jefferies LoanCore LLC, a new joint venture commercial real estate finance company with $600 million in initial equity commitments that will be leveraged appropriately. Jefferies LoanCore will originate commercial real estate debt through a team of professionals led by Mr. Finerman, with the support of the broad real estate, investment banking and securitization capabilities of Jefferies, and the deep real estate and mortgage investment expertise of GIC Real Estate, the real estate investment arm of GIC.

“We are very excited to partner with GIC Real Estate to launch Jefferies LoanCore LLC, which further expands Jefferies’ investment banking and trading franchise by offering commercial real estate investors further access to capital,” said Richard B. Handler, Chairman and Chief Executive Officer of Jefferies Group. “Mark Finerman has an outstanding track record as a leader in the commercial real estate finance sector, and we are pleased to be working with Mark and his talented team.”

“We welcome the opportunity to establish a long-term partnership with Jefferies Group in commercial real estate finance,” said Dr. Seek Ngee Huat, President of GIC Real Estate. “We have worked successfully with Mark Finerman for several years and look forward to expanding our relationship with this further commitment.”

“Jefferies LoanCore expects to respond to the capital needs of commercial real estate owners and investors across the United States,” said Mr. Finerman, CEO of Jefferies LoanCore. “As our industry recovers from the disruption of the recent financial crisis, we expect Jefferies LoanCore to be a leader in providing creative capital solutions.”"

Source: Press Release

The press release states, “Temasek Financial (II) Private Limited (“TFin-II”) has established a US$5 billion Euro-commercial Paper (“Temasek ECP”) programme, fully and unconditionally guaranteed by Temasek Holdings (Private) Limited (“Temasek”).

The Temasek ECP programme adds flexibility to Temasek’s short-term funding options. It complements Temasek’s existing long-term US$10 billion Guaranteed Global Medium Term Note (“MTN”) programme, which was first launched in 2005 as a public marker of Temasek’s credit quality, and further broadens Temasek’s stakeholder base.”

Source: Temasek Holdings

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A number of sovereign wealth funds are lowering allocation from bonds to more risky, illiquid assets, such as direct investment in companies.  Their position sizes have increased and they are now providing more capital for public and private companies across various industries.  SWFs have made generous profits from investing in direct investment / PIPE investments in numerous industries such as natural resources, materials, real estate, financial institutions, and energy.  Furthermore, there is growing collaboration among SWFs, whether investing in an IPO, PIPE, or even venture capital deal.  Private back room deals with favorable investment terms are enhancing returns, rather than purchasing shares in the public markets.  In general, institutional investors are relying less on public markets for returns.[Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view site content.]

The Vietnam News Agency reports, “CapitaLand Viet Nam Investments Pte Ltd (CVI) has entered into a US$200 million joint venture with Japan’s Mitsubishi Estate Asia Pte Ltd (MEA) and an affiliate of GIC Real Estate, the real estate investment arm of Government of Singapore Investment Corporation, to invest in prime real estate development projects in HCM City and Ha Noi. CVI, which is a wholly-owned subsidiary of CapitaLand (Viet Nam) Holdings Pte Ltd, will take up a 50-per- cent stake in the joint venture, while the balance will be held in equal proportions by MEA and the affiliate of GIC Real Estate.

MEA is a wholly-owned subsidiary of Mitsubishi Estate Company Limited. CVI will inject a pipeline of projects into the joint venture, while CapitaLand will undertake project management for these projects. The first project will be an approximately 34,000sq.m site located in HCM City’s Thanh My Loi Ward in District 2.

The first phase of this project will be a residential development that will offer 962 apartments supported by approximately 7,700sq.m of retail space.”

Read more: VNA

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According to Reuters, “Singapore’s biggest sovereign wealth fund GIC has chosen UBS, China International Capital Corp (CICC) and Singapore’s DBS as joint bookrunners for its upcoming logistics unit IPO, two sources familiar with the deal said.

The initial public offering is likely to raise $2-$3 billion, much higher than earlier estimated, said the sources who declined to be named because the deal has not been made public yet.

These banks will join JPMorgan and Citigroup, which were first chosen as joint global coordinators, they said.

UBS and DBS declined to comment and CICC was not immediately available for comment. GIC also declined to comment.”

Source: Reuters

Tony Tan

According to Bloomberg, “The global rebound is “fragile” and shocks could push the world toward another recession, according to Government of Singapore Investment Corp., manager of more than $100 billion of the nation’s foreign reserves.

Risks to the global recovery have increased due to Europe’s debt turmoil, continued deleveraging in the U.S. and protectionist pressures, Tony Tan, deputy chairman of GIC, said in a speech in Singapore today. The fund is ranked the world’s sixth-largest state investment company by Sovereign Wealth Fund Institute in California.

“The economic recovery, while real, is fragile and there is a risk that negative shocks could push the global economy towards a recession sooner than expected,” Tan said. “The strong rebound in global industrial production is peaking while monetary and fiscal policies, particularly in the larger emerging economies, are being normalized.””

Read more: Bloomberg

According to the press release, “Temasek Holdings (Private) Limited (Temasek) today released its annual performance report and institutional review, Temasek Report 2010 – Making a Difference, for financial year ended 31 March 2010. Temasek Report 2010 sets out highlights of the firm’s portfolio returns and investments, its consolidated group financial summary and institutional framework as well as its engagement with stakeholders, including the wider community.

Delivering Long Term Returns

The market value of Temasek’s portfolio as at 31 March 2010 rebounded to a new financial year-end high of S$186 billion. This is an increase of S$56 billion from a year earlier, with a Total Shareholder Return of over 42% for the year.

The book value of the Temasek portfolio increased to S$150 billion, up from S$50 billion 10 years ago, underpinned by the secular growth of its portfolio companies and Temasek’s own investment activities.

Total Shareholder Return (TSR), measuring returns on an annually compounded basis since inception, was 17% by market value, and 16% by shareholder funds. Both 20-year and 30-year TSRs held steady at a creditable 16% by market value and 14% by shareholder funds.

Medium-term five-year TSR was relatively robust at 11% by market value and 14% by shareholder funds, while 10-year TSR compounded annually from the peak of the dotcom bubble, was 6% by market value and 12% by shareholder funds.

Also known as Wealth Added or Economic Profit, total portfolio returns to the shareholder, net of a risk-adjusted hurdle, was S$42 billion for the year, while group net profit was S$5 billion, with lower profit contributions from some of the portfolio companies which were impacted by the global financial crisis.

Temasek closed the financial year on 31 March 2010 with a comfortable net cash position.

Mr S Dhanabalan, Chairman of Temasek Holdings said, “Since inception, Temasek has been committed to create and deliver sustainable value as an active investor and shareholder of successful enterprises.”

“Our portfolio has delivered consistently through market cycles. Long-term TSR by market value held steady at 17% since inception, while both 20- and 30-year TSRs were 16%.””

Read more: Temasek Press Release

According to the press release, “Norwegian finance minister Sigbjørn Johnsen and Norges Bank’s governor Svein Gjedrem were in attendance on Wednesday when Norges Bank Investment Management (NBIM), manager of the Government Pension Fund Global, opened a new office in Singapore. The office will help NBIM’s existing office in Shanghai to cover the increasingly important Asia region.

Various representatives of the Singapore authorities and local business community, including trade and industry minister Lim Hng Kiang, were also at the opening ceremony.

“An office in Singapore will strengthen our operations in Asia,” commented Gjedrem. “Having a presence in a region with strong economic growth is important for achieving good management results.”

As one of Asia’s foremost financial centres, Singapore offers good investment opportunities and has a well-developed financial infrastructure. Asset management is a major industry in the country, making it possible for NBIM to recruit and retain skilled workers.

“The new office will be a good supplement to the Shanghai office opened in 2007,” commented NBIM’s CEO Yngve Slyngstad.

Sigmund Kyrdalen has been appointed general manager in Singapore. He is a senior portfolio manager at NBIM and managed NBIM’s London office for two years.  The Government Pension Fund Global had a market value of almost 2 800 billion kroner at the end of June. Around 10 percent of the fund is invested in Asia, and around 15 percent of its equity investments are in Asian companies.

Besides Singapore, NBIM has offices in Oslo, London, New York and Shanghai.”

Press Release: NBIM

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According to Reuters, “The Government of Singapore Investment Corp (GIC) is exploring the possible listing of its logistics business in Singapore in an IPO valued at between $500 million to $1 billion, sources with knowledge of the deal told Reuters. The business is part of GIC Real Estate or GIC RE which is ranked amongst the world’s top 10 real estate investment firms. GIC, Singapore’s biggest sovereign wealth fund, declined comment.

“The proposal was to list their logistics business,” said a source who is aware of GIC’s plan. “They could do an industrial REIT (real estate investment trust).”

GIC RE manages a multi-billion U.S. dollar global portfolio of property assets, with over 200 investments in more than 30 countries.

JPMorgan and Citigroup are among the banks leading the talks for the mandate, one of the sources told Reuters.”

Source: Reuters

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GIC, a sovereign wealth fund of Singapore, said Tuesday that its investments fell more than 20 percent in the year that ended in March, but recovered more than half that loss during the rally on financial markets since then.G.L.C., or the Government of Singapore Investment Corp., the larger of the city-state’s two wealth funds, said it had increased exposure to alternative investments like real estate and natural resources but was bearish on bonds. The fund said its managers were optimistic about emerging markets and Asia.

The fund’s portfolio shrank by more than a fifth in the year that ended March 31, but it has ridden the financial meltdown better than its sister fund Temasek by paring its exposure to equities before the crisis and through a well-timed sale of part of its Citigroup holding. G.I.C., headed by Lee Kuan Yew, the former prime minister, is the largest sovereign fund in the world after those of Abu Dhabi, Saudi Arabia and Norway, according to Deutsche Bank. The fund says it manages more than $100 billion; analysts estimate the figure at $200 billion to $300 billion.

read more: The New York Times

Reuters reports, “The chairman of the Government of Singapore Investment Corp (GIC), the city-state’s biggest sovereign wealth fund, said on Monday the fund will be cautious and take few risks. His comments came after the country’s other sovereign fund Temasek saw big losses on its investments in Western banks.

‘GIC will be cautious, low risk,’ said Lee Kuan Yew in a discussion at an aviation meeting in Malaysia.

Temasek’s new American chief Chip Goodyear would, however, “seize opportunities”, said Lee, Singapore’s former prime minister and the father of current prime minister Lee Hsien Loong. “

read more: Reuters

Reuters reports that, “The Singapore government will help nurture local companies compete in international markets, but will not force its sovereign wealth fund Temasek to finance them as suggested by some legislators, Prime Minister Lee Hsien Loong told parliament on Wednesday.

‘Government wants to help companies grow, is trying many ways and is willing to do more,’ Lee said. ‘But we don’t believe that this can be done by the government by simply pouring money, or creating a ‘Temasek II,’ he said.

His remarks were in response to ideas floated by two members of parliament on Tuesday that Temasek could make a greater difference to the island-state by helping home-grown enterprises expand regionally and globally. The government has come under fire from citizens and lawmakers over losses at Temasek, in particular its ill-timed exit from Bank of America which resulted in a loss of over $3 billion.”

read more: Reuters

According to the Business Standard, “the finance ministry and the Reserve Bank of India (RBI) has asked the Securities and Exchange Board of India (Sebi) to examine whether a proposal by Temasek Holdings and Government of Singapore Investment Corporation (GIC) to increase their stakes in ICICI Bank would trigger the takeover code under which they would have to make an open offer to buy an additional 20%. The Singapore government has sought clarification on a proposal for the two companies to increase their stakes in ICICI Bank to 20 per cent, each holding 10 per cent. This would collectively make them the largest shareholders in the country’s largest private bank. Currently, Life Insurance Corporate is the single largest shareholder with 9.38%. The two Singapore investment vehicles currently hold 10.3 per cent in the bank — Temasek 8 per cent and GIC 2.3 per cent.

Sebi is yet to take a final view on the issue, sources said. The issue hinges on whether the two entities should be treated as one entity or not.”

read more: Business Standard

According to the website, “Tony Tan Keng-Yam, Deputy Chairman and Executive Director, Government of Singapore Investment Corporation (GIC), Singapore, said there would likely be a shake-out in the financial system into two tiers: first, a core of tightly regulated, large commercial banks working with lower levels of leverage than in the past; second, a group of “quasi banks” (private equity, hedge funds, etc.) with a different regulatory structure from commercial banks and no access to the central banks. Investment banks would probably come somewhere in-between, he said. It was normal that governments had intervened to prop up confidence. Now the question was how they would extract themselves in a way that provides incentives to shareholders, who will be necessary for a strong banking sector in the future. He also warned of the dangers of over-regulation stifling creativity.”

read more: World Economic Forum

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According to the press release, “CNOOC Limited (the “Company”) announces that an investor group led by AIG Asian Infrastructure Fund II, L.P. (“AIGAIF”), GIC Special Investments Pte. Ltd. (the private equity arm of the Government of Singapore Investment Corporation (“GIC”)) and American International Assurance (“AIA”) have invested approximately US$210 million in the equity shares of the Company. The share placement closed on April 7, 2000. The Company will use the proceeds from the placement to finance its capital expenditure and working capital requirement as well as to repay its existing bank debt.

AIGAIF, with US$1.7 billion in commitment, makes equity and equity-linked investments in infrastructure and infrastructure-related sectors in Asia. American International Group, Inc. is the sponsor and GIC is the principal investor of AIGAIF. The principal adviser to AIGAIF is Emerging Markets Partnership.

GIC is a fund management company entrusted with the mandate to manage Singapore′s foreign reserves.

The Company′s Chairman and CEO Liucheng Wei emphasized the significance of this investment: “With this investment, we gain access to international financial market to fulfill our growth plans for 2000 and beyond. We have set a clear goal for the Company: to establish ourselves as one of the world′s premier exploration and production companies. Offshore natural gas is an increasingly important source of clean and reliable energy for China and will be a key growth area for the Company. We are pleased to have support from sophisticated international investors such as AIGAIF, GIC and AIA.”

The Company was formed on October 1, 1999 through the reorganization of parent company China National Offshore Oil Corporation (“CNOOC”) and is one of the world′s largest exploration and production companies. The Company dominates the offshore oil and natural gas exploration and production in China. During the 12 months ended 1999, the Company had US$1.8 billion in revenues, US$495 million in net income and averaged daily production in excess of 210,000 barrels of oil equivalent. As of December 31, 1999, the Company had reserves of approximately 1.8 billion barrels of oil equivalent.

Through CNOOC, the Company has the exclusive right to enter into production sharing contracts (“PSCs”) with international oil and gas companies to conduct joint exploration and production activities offshore China and to sell such petroleum in China. Under the PSCs, the Company has the right to acquire up to a 51% participating interest in any oil or gas field discovered in the contract area after the foreign party has independently undertaken exploration and discovered commercial quantities of oil or gas.

CNOOC Ltd. is the largest producer of oil and gas offshore China and is one of the largest independent oil and gas exploration and production companies in the world with net proved reserves of approximately 1.8 billion barrels-of-oil equivalent as of December 31, 1999.”

Read more: Press Release