Temasek May Have Lost its Compass

Yes, you can say it again.

This financial GLC of the city-state of Singapore, has turned into a mythical chimera-part lion goat and serpent.

Combining the aspects of a hedge fund, private equity house and investment bank,it has done some financial gymnastics like flipping over shares in two China banks for a premium of 20% and then buying into another.

with a penchant for private-equity style financial massaging, it turned king-maker in the proposed take-over of the iconic Bank Danamon of Indonesia, forcing Indonesian market regulators to suggest stake caps for foreign ownership of Indonesian banks.

Finally, almost acting like an investment bank, Temasek hired big-hitting bankers like UBS finance director John Cryan to run its operations even clawing back past bonuses when performance fell short.

The consequences of this adventurism has reduced the returns to its sole shareholder, The finance ministry of Singapore. Used to receiving about 15% returns for the past 20 years, it is now receiving a paltry sum of 5% annually.

So too may its investment-bank-like pay which leans heavily on performance Temasek even claws back past bonuses when the fund fails to meet its internal hurdle rate as happened in 2010 This combination could be just what’s needed Temasek’s return to the finance ministry its sole shareholder was below five per cent in 2010 its last reported period — compared with a 20-year average of 15 per cent.

Without healthy returns,its now hard for Temasek to justify the US$155 billion fund’s existence it is operating with. If personal remains sluggish, expect the non-nonsense Singapore authority to do a complete clean-up of Temasek.

Is Khazanah also subjected to fast and hard rules or return or are they just another storage bin for GLCs premiums before selling companies underneath its wings to possibly witless but connected entrepreneurs?