Temasek’s Global Investments Unit Targets Larger Deals, Exits Smaller Holdings

Temasek Holdings Pte has announced a strategic shift within its newly established global investments unit, which will prioritize larger transactions while divesting from smaller assets. Incoming President Nagi Hamiyeh revealed that the Singapore state-owned investment firm aims to focus on deals valued between approximately €500 million and €1 billion (around $590 million to $1.2 billion) as it navigates a challenging investment landscape.

In an interview in Paris, Hamiyeh stated that this decision is part of a broader reorganization of Temasek’s operations, which will officially take effect on April 1. The global investments arm currently manages S$155 billion ($121 billion), accounting for about 36% of Temasek’s total portfolio.

The firm has already begun the process of offloading smaller assets that require considerable management resources. Hamiyeh emphasized that any investment below €200 million will not be pursued, with plans to sell such holdings over time. He mentioned that while larger deals could present challenges, they are essential for the firm’s future direction.

Focus on Major Markets and Strategic Investments

Temasek’s restructuring includes the identification of 22 smaller “long-tail” assets, of which eight have already been sold since last year. The unit’s portfolio encompasses a diverse range of investments, including Indian healthcare operator Manipal Health Enterprises, U.S. investment firm BlackRock Inc., and Chinese technology giant Tencent Holdings Ltd..

Hamiyeh noted that the firm will concentrate its investments in three primary regions: the United States, Europe, and India. In Europe alone, Temasek has already allocated over S$10 billion of a planned S$25 billion investment over the next five years. He remarked, “The U.S. is the deepest market in terms of opportunities in terms of capital markets, followed by Europe.”

Despite a slowdown within the luxury sector affecting high-end brands, Hamiyeh expressed enthusiasm for investing in such companies. He highlighted a recent deal to acquire a 10% stake in the Italian fashion house Zegna Group, valued at approximately $220 million, which reportedly took a year of discussions to finalize.

Shifting Investment Strategies Amid Changing Markets

Temasek is also exploring opportunities in the sports sector, with Hamiyeh identifying CVC Capital Partners‘ investment in Formula 1 as a noteworthy example. He pointed out that some investors have seen significant returns in India’s cricket market, reflecting the potential for lucrative investments in sports.

While the firm’s net portfolio value reached a record high in its latest fiscal year, its ten-year total shareholder return of 5% has underperformed the MSCI World Index, which delivered a 10% annualized return during the same period.

Hamiyeh, who previously focused on enhancing value within Temasek’s Singaporean operations, is set to play a pivotal role in this transition. The firm’s Chief Executive Officer Dilhan Pillay indicated that the restructuring aims to prepare the next generation of leaders within the company.

Looking ahead, Hamiyeh anticipates that the portfolio outside of Singapore will grow more dynamically compared to the mature portfolio within the city-state. Plans are in place to expand the Paris office from 15 to about 20 staff members, indicating the firm’s commitment to strengthening its presence in Europe.

In conclusion, Temasek Holdings is redefining its investment strategy to focus on larger, more impactful deals while strategically exiting smaller positions. This approach is intended to streamline operations and enhance overall performance in an evolving global market.