Chairman, the reason for my cut on sovereign wealth funds’ transparency is simple: we must demand better standards from the investment managers managing our reserves, and take the lead in transparency, accountability and governance standards as these involve the stewardship of public monies for all Singaporeans, not just to its direct shareholders.
We should aim for transparency in both our public and private market investments, regardless of whether it’s held by GIC, Temasek Holdings, the MAS or even the CPF for that matter.
To many market observers, the gold standard, as in most things SWF-related, is the Norges Bank Investment Management (NBIM), Norway’s Sovereign Wealth Fund. When it comes to transparency, they publicly share a whole suite of details regarding their operations: from individual investments, returns before and after fees, even voting records.
Their CEO Nicolai Tangen, has a very popular podcast “In Good Company”, where he interviews portfolio companies and prefaces every interview openly discussing fund ownership details. They prove you can be transparent AND perform well.
On transparency however, Singapore's sovereign funds are falling short. Unlike Temasek Holdings, GIC does not even share annual performance figures. I don’t think the GIC assesses the performance of the third-party fund managers they are invested in merely on a 5-year basis. I understand the rationale of not disclosing its assets under management, but hiding performance figures does not make sense, and merely raises questions.
There is another dimension to transparency. I noticed that Temasek is invested in not just private markets, but many of these investment structures are also increasingly complex, perhaps a reflection of the investment landscape today. An example is that of continuation funds.
A Business Times article dated 12 October 2024 was titled, “Temasek CIO gets behind asset-shuffling funds snubbed by others”. It further goes on to say: “The chief investment officer (CIO) of the Singaporean state-owned investor voiced unusual enthusiasm for continuation funds, in which private equity managers shift hard-to-sell assets from an older vehicle into a brand-new one. The repackaged assets are then offered to investors such as Temasek, known as limited partners.”
Chairman, these harder-to-value investments need more oversight, not less, yet they're becoming less transparent even as investments get more complex. In accounting, level three financial assets require significant use of internal models and assumptions to estimate fair value, as reliable market data is not readily available. Hence listed companies have to disclose in their annual report details of their valuation methodologies and the assumptions made in their financial statements.
There’s a glaring contradiction in all of these. Even as the Government and Temasek demands good corporate governance from the companies they invest in, they're secretive about their own performance and remuneration metrics. Chairman, we must demand better standards from the investment managers managing our reserves. Any attempt to deflect these questions via “operational independence” must be rejected.
