While much of the Western world, Japan, and even China are wallowing under crushing debt burdens, the tiny city-state of Singapore is sitting on various national sovereign wealth funds and investments that could total some 1 trillion dollars or more in assets. Now one of Singapore’s sovereign wealth funds, Temasek Holdings, is looking to add European and North American assets to their 160 billion sovereign wealth fund.
Singapore is no stranger to international purchases. Indeed, while many sovereign wealth funds focus on internal investments, Singapore has made it a point to diversify its holdings from the very beginning. While local companies such as Singapore Airlines have been funded through sovereign wealth funds, Temasek and other Singapore national wealth funds also feature highly diversified portfolios. Just last year, Temasek made 2.7 billion dollars worth of investments in the USA in energy and agricultural companies.
Now Temasek is looking to make long-term investments in the United States. According to the company, it believes that U.S. and European companies present great long-term investment opportunities. While American investors may be afraid of short term losses, Singapore has the balance sheet necessary to sit on investments and wait for them to appreciate, even if it suffers losses in the near term.
Singapore Wooing Western Companies With Asian Influence
The Singaporean government appears to be especially keen to acquire investments in Western companies that hold natural advantages over their Asian counterparts. American, and to a lesser extent European, companies enjoy large leads in high-end technology and advanced skills. While Singapore has made itself into a financial hub, and does support a strong research base, Singaporean leaders understand that a city-state of 5 million people will face an uphill battle in high-end R&D. But hey, if you can’t beat them, why not join them? And Singapore appears to be doing just that with its investment portfolio.
In Europe, the Singaporean government is taking the wise strategy of investing in companies that derive large portions of their revenues from overseas. Now, Temasek is looking to open small offices in both New York City and London and expects to staff about 20 people in each office. While these numbers are small, they will give the company eyes and ears needed on the ground, which may prove invaluable as the company ramps up its European and North American purchases.
Asia still accounts for 72 percent of Singapore’s holdings, as of 2012, but this is down from 77 percent from a year before. Besides Singapore, China is the second largest destination for Temasek investments. The Government of Singapore Investment Corporation (GIC) is believed to hold about 33 percent of its assets in the Americas, vs only 29 percent in Asia, as of 2012. Still, it should be noted that GIC has actually been shifting away from North America, in 2011, 42 percent of its assets were held in the Americas. Breakdowns per country are not available, nor is the total size of the fund public. It is possible that GIC’s investments are concentrated in South and Central America as Singapore has shown a preference for investing in stable emerging markets, such as Singapore and China.
Singapore Assets Shrouded in Secrecy
Further, while Temasek is more straight forward with the size of its portfolio, the Government of Singapore Investment Corporation (GIC) keeps its assets hidden but is believed to be worth over 500 billion dollars. The government keeps GIC’s assets shrouded in an effort to keep the total value of its cash reserves hidden from speculators who may try to influence Singapore’s exchange rates. Singapore is also sitting on huge foreign exchange reserves with a total value of at least 250 billion dollars. With all this money “lying” around, the government of Singapore will likely become an increasingly important player in investment markets in the years to come.