Singapore’s Temasek fund writes off 275 million

 

“So every generation prospers” is the mission of the Singaporean investment company Temasek. And in keeping with this mission, Temasek invests in four areas: sustainability, longer lifespans, future-oriented consumption and digitalization.

This is how Temasek came to invest in Sam Bankman-Fried’s then-emerging crypto exchange FTX in October 2021. Like many small investors, even a professional large investor like Temasek was surprised when FTX filed for bankruptcy in early November. This happened after a “bank run” had occurred due to rumors of dubious business practices.

Meanwhile, investigations have been launched against the founder, Sam Bankman-Fried. In an interview at the New York Times Deal Book Conference on Wednesday (November 30), he claimed that he himself only realized in early November that there were discrepancies at FTX.

Blind spot

Temasek is 100 percent owned by the state of Singapore, but prefers the term investment company because, unlike traditional sovereign wealth funds, it is privately managed and the government has no influence on investment decisions. Temasek’s 20 partners decided to invest $210 million in FTX International and a further $65 million in FTX US. This corresponds to a 1 percent stake in the crypto exchange. Uwe Krüger, European head of Temasek, emphasizes that the investment company does not hold any positions in cryptocurrencies, but has only invested in FTX’s platform and software infrastructure.

 

Temasek’s portfolio is worth 297 billion dollars. The 275 million dollars that the investment company now has to write off are therefore manageable. Nevertheless, it is astonishing how such a misjudgment could have occurred despite the extensive audits that preceded the investment. Was there a blind spot among professional investors? “We are currently examining this as part of an internal audit. It is too early to draw any conclusions at this point. In any case, blockchain technology remains an important field of innovation,” says Krüger.

As the Financial Times reports, Lawrence Wong, Singapore’s deputy prime minister, told parliament that Temasek’s losses were “disappointing” and had damaged the city-state’s reputation. One can certainly ask whether Temasek, as a professional investment company, sent the wrong signal to the market and thus to retail investors by investing in FTX.

There are reports on the market that, due to the FTX case, large investors are now considering not investing in unregulated platforms in the future. Accordingly, it will be much more difficult for unregulated crypto exchanges to find investors. As a result, pressure will automatically arise in the industry to submit to a minimum level of regulation. And this is not the only reason why Temasek does not want to forego investments in blockchain technology in the future. “The technology is not only useful in the financial sector, but also in supply chain management. With the help of blockchain, supply chains can be tracked much better in the future,” says Krüger.

Swiss companies also in focus

Temasek is also present in Switzerland with various investments. The best known is probably the majority stake of 70 percent in Gategroup. During the Corona pandemic, Temasek injected another half a billion dollars into the airline caterer. The company is currently battling inflation. Gategroup is in price negotiations with the airlines, says Krüger. The main issue here is fairness in view of the sharp increase in operating costs. An IPO will only be considered at a “much later date”.

 

The investment in Brusa HyPower in Buchs (SG) is likely to bring more joy. The company was originally founded by Josef Brusa from Buchs in cooperation with the Buchs University of Applied Sciences (NTB) and produces power electronics for fuel cell and electric vehicles. Temasek has provided a high double-digit million amount in growth capital.

Oviva is another investment by Temasek in the double-digit million range. The healthtech company from the canton of Schwyz was founded by a former McKinsey partner. The company has developed an app for people who are particularly at risk of developing type 2 diabetes to help them change their lifestyle habits.

Expanding investments in Europe

Since the investment company was founded in 1974, the portfolio has grown from 240 million to 297 billion dollars. Over the last decade, Temasek has reinvested between 22 and 25 billion dollars annually. The money comes from dividends, funds and sales. Unlike Singapore’s second sovereign wealth fund, GIC, Temasek does not manage pension funds or other funds from the city-state’s financial budget. GIC became known in Switzerland for its assistance in rescuing UBS during the financial crisis.

For a long time, Temasek only invested in Singapore and Southeast Asia. In 2012, the investment company opened offices in Hong Kong, New York and London. In Europe, it operates an office in Brussels in addition to the one in London, and a third office in Paris is to be opened next year. “We want to expand our presence as a long-term investor in Europe,” says Krüger. Temasek is currently investing 35 billion dollars in the Europe, Middle East and Africa (EMEA) economic area. This corresponds to 12 percent of the entire Temasek portfolio and is about four times as much as ten years ago.

Temasek’s investment in the company Biontech caused a stir during the corona pandemic. Biontech’s share price rose to $463 in August 2021. Since the beginning of 2022, it has fluctuated between $130 and $170. A large part of Temasek’s investments are large minority stakes in privately held companies, as in the case of the Danish company Haldor Topsoe. The family business is active in the field of chemical catalysts and energy transmission and was in the process of reorientation. “As partners, we are committed to long-term commitments alongside family-run companies, we provide growth capital and accompany generational change,” says Uwe Krüger.