Temasek’s New Unit Targets Big Deals, Sells Small Assets NOW

UPDATE: Temasek Holdings Pte has just announced a strategic shift in its investment approach, focusing on larger deals while divesting smaller holdings. The new global investments unit, led by incoming President Nagi Hamiyeh, aims to streamline operations amid a challenging investment landscape.

In an exclusive interview in Paris, Hamiyeh confirmed that the unit will target transactions between €500 million and €1 billion (approximately $590 million to $1.2 billion). This marks a significant pivot away from smaller investments, with the firm actively selling off assets valued at less than €200 million. Hamiyeh stated, “Anything where our cost is less than €200 million, we’re not interested in; over time we will sell.”

The newly formed Temasek Global Investments, which manages S$155 billion (about $121 billion) in assets, is set to commence operations on April 1, 2024. This restructure is part of a broader initiative to enhance efficiency and performance. Hamiyeh noted that the unit has already identified 22 small “long-tail” assets for divestiture, successfully selling eight since last year.

Organizations like India’s Manipal Health Enterprises, BlackRock Inc. from the US, and Tencent Holdings Ltd. from China are among the holdings under his purview. Temasek’s strategic focus will shift towards the US, Europe, and India as its primary investment regions, with over S$10 billion already allocated in Europe out of a planned S$25 billion investment over five years.

The urgency of this repositioning comes as Temasek looks to adapt to a rapidly changing market environment. Hamiyeh emphasized that while the firm continues to invest in China, the pace will be much slower than in previous years. “The US is the deepest market in terms of opportunities in capital markets, followed by Europe,” he explained.

Despite recent downturns in the luxury sector, Temasek is set to continue its backing of high-end brands. Hamiyeh highlighted a recent investment in Italian fashion house Zegna Group, securing a 10% stake valued at approximately $220 million. The deal, which took a year to finalize, showcases Temasek’s commitment to strategic luxury investments.

On the public investment side, Temasek has developed a wish list of 15 European companies across various sectors, including luxury, consumer goods, life sciences, and energy. “There is a financial model built for all of these, and every day we check: is it at a dislocated price that allows us to go in or not?” Hamiyeh stated.

The firm is also exploring opportunities in sports investments, citing CVC Capital Partners’ involvement in Formula 1 as a strong example. Hamiyeh noted that investors have profited significantly from cricket ventures in India, indicating a keen interest in diversifying into sports properties.

While Temasek’s net portfolio value reached a record high in its latest fiscal year, its 10-year total shareholder return of 5% has lagged behind the MSCI World Index, which returned 10% annually over the same period. Hamiyeh’s leadership role will be crucial as the firm seeks to enhance returns outside of Singapore, which he described as a “mature portfolio” that will grow at a slower rate.

As Hamiyeh prepares to expand the Paris office from 15 to 20 staff, the focus remains on developing a more dynamic portfolio. “Every now and then, we revisit with the boards of the companies areas where it makes sense to be ‘bigger is better’,” he said, highlighting a proactive approach to investment management.

Stay tuned for more updates as Temasek navigates this significant transition in its investment strategy.