Temasek reported that the value of its portfolio fell to S$382 billion.maintain a cautious investment stance

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FTX “anomaly”

Chief Investment Officer Rohit Sipahimalani said of the “disappointing” venture into FTX that, at the time of the decision to invest in Temasek, the cryptocurrency company had superior technology, rapidly growing market share, and a regulatory challenge. He said it looked like a “very compliant” company based on his views. check.

Temasek’s team also spent time on FTX’s due diligence, but Sipahimalani added that “it’s impossible to detect fraud all the time.”

He said Temasek has learned lessons from its failed investments, including strengthening its due diligence processes and areas of focus, especially for high-growth companies.

“We recognize that fraud is difficult to prevent completely, and we hope that such situations can be avoided in the future,” Sipahimalani said.

“And we recognize that there are two dimensions of risk in early-stage investments, and[those]risks need to be managed,” he added.

In May, Temasek said it had cut compensation for senior management and investment teams involved in failed investments. An internal review conducted by an independent team found no wrongdoing by the investment team in making the investment recommendation.

Asked by a reporter whether more drastic disciplinary action was needed, Temasek Chief Executive Officer Dilhan Pillay said the pay cuts had been reversed due to the damage to Temasek’s reputation.

“When something affects your reputation, it’s time to take a little punitive action, because every time you do something, you remind yourself that the problem isn’t just the financial risk that comes with investing. because I want to,” he added.

“It’s a reputational risk and we take reputation very seriously … but if you say you’ll take further action, I don’t think it’s justified. “

Pillay said Temasek was in a “risk-taking business” and was open to “either or not” when underwriting investments.

“We consider all risks and mitigating factors and make decisions,” he said.

“The question is whether the portfolio will perform well …[it is]ultimately a combination of different efforts in making those decisions … and that is the end goal and the purpose that can be achieved. As long as it’s okay, of course.” You could say that FTX was an anomaly. ”

maintain a cautious investment stance

Temasek ended the fiscal year in a net cash position, giving it flexibility to take advantage of future opportunities, Pung said.

That said, the global economy remains fragile amid intensifying geopolitical developments such as the US-China conflict and the impact of the war in Ukraine. At the same time, monetary policy has tightened globally and interest rates remain high, while inflation remains high.

Temasek expects global economic growth to slow, with recession risks looming in major developed markets, which could be “further exacerbated” by shocks such as previous banking sector failures. .

At home, the Singapore economy will battle slowing global growth and rising inflation.

While China’s reopening could provide some support, Singapore’s economy is more focused on domestic demand in developed markets that could be hit by a recession. Rising geopolitical tensions will add to the challenge, but Singapore could benefit from diversifying supply chains around the region in the short and medium term, the report said.

“Given the challenging macroeconomic environment, we maintain a cautious investment stance and plan to invest at a moderate pace this year,” said Rohit Sipahimalani, chief investment officer at Temasek.

Still, we are ready to step up our investments for a market correction against the backdrop of our “strong” liquidity position.

“In an increasingly complex and volatile backdrop, we will seek opportunities aligned with long-term structural trends to build a resilient, forward-looking portfolio as part of our T2030 strategy,” said Sipahimalani. We will continue to focus on investment.”

A key pillar of this 2030 strategy is building a resilient and forward-looking portfolio, which has two components.

The first is the ‘resilient’ component, which is about 60-70% of the portfolio. It consists of Temasek’s core portfolio companies and asset management business, which are “long-term investments that deliver stable and sustainable returns,” Pillay said.

The remaining 30-40 percent of the portfolio will be a “more dynamic” portfolio of direct investments in various focus areas and early-stage private companies.

“Our focus in portfolio construction over the last decade has been to build portfolios that can withstand exogenous shocks and perform through market ups and downs cycles,” Pillay said.

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