Emerging Markets Global Financial Power: Ho Ching

Emerging Markets World Bank editions, October 2009

China Investment Corporation gets the headlines in Asia these days, but the elder statesman of Asian sovereign wealth funds is Singapore’s Temasek, founded in 1974 with a government seeding of 35 company holdings from a detergent maker to a bird park. These days its portfolio is worth S$172 billion, even after some humbling errors over the last 18 months, and it claims a compound annual total shareholder return of 16% since inception.

It is a curious situation, but the person who has overseen a transformation in Temasek’s professionalism, disclosure and sophistication is a person who should, on paper, exemplify conflict and a lack of qualification: Ho Ching, who quite apart from having joined from the unpromising background of the Ministry of Defence is also the wife of prime minister Lee Hsien Loong. But it is under Ho’s watch that Temasek has become an institution that scores highly on independent indices of sovereign wealth fund transparency around the world. It doesn’t disclose everything, but its detailed annual reviews frequently top 100 pages and are an open book compared to sovereign funds in the Middle East. Also under her watch has come a compensation system tied to performance which resulted in slashed pay and bonuses for senior executives last year. She answers to a board containing only one member in a direct government position, with a varied roster of other members that balances locals with executive director Simon Israel, formerly at Danone Group, and Marcus Wallenberg of the Scandinavian SEB Group.

For any sovereign fund there is a challenging balance to strike between public utility and commercial enterprise; the more so since Temasek remains a major shareholder in iconic Singaporean companies including Singapore Airlines, DBS and CapitaLand. But Ho is increasingly strident about what Temasek should seek to do. “We don’t see our role as shoring up anybody,” she says. “We see our role as getting a return and if there are opportunities for return, we will be there.”

While Ho and her team’s approach and performance reflect the growth in ability and power of emerging market sovereign wealth funds, it’s not all good news, especially lately. Ho’s time has seen the company suffer from its association with the Singapore state, most obviously in the acrimonious purchase of a stake in Thailand’s Shin Corp; and not only get burned in untimely purchases of Barclays and Merrill Lynch stakes but to sell them at the bottom of the market. Moreover, if all had gone to plan she would be in her final weeks as you read this: former BHP Billiton chief executive Chip Goodyear was supposed to take over in October, but in a still unexplained decision the two parties went their separate ways suddenly in July, raising doubts about Temasek’s receptiveness to new ideas.

This last, and Singapore’s opacity about the reasons, has dented Temasek’s improving reputation for openness, but Ho can still point to market-beating returns over almost any timeframe – and it is instructive that the duff investments during her tenure have been in the developed world. “We felt there could be a downturn… but we were looking at the triggers in the wrong places and part of the reason is because we made the assumption that the developed economies, particularly the large economies, are well managed and the regulatory risks are low,” she says. “Going forward today, we pay a lot of attention to what is being said and done in the US.” For the future, a burnt Temasek is going to cut the developed OECD to just 20% of its portfolio and stick to what it knows: 70% in Asia including Singapore, and a further 10% in other emerging markets. That, it seems, is where the opportunities are, and the markets the fund knows best.

To see the article as it ran, click here: GFPsupplement 2