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August 23, 2008

Singapore's Temasek says assets hit $131bn
Singapore's state-linked investment firm Temasek Holdings said it had assets of 131 billion US dollars and warned it could be damaged by any backlash against sovereign wealth funds, reported AFP.

Company chairman S. Dhanabalan said during a speech that Temasek owned a "net portfolio of about 185 billion Singapore dollars" at market prices at the end of March, according to a text of his comments released Friday.

But Dhanabalan also said during the speech at a conference Thursday that Temasek risked "collateral damage" from negative sentiment against sovereign wealth funds, whose growing power has stirred controversy.

"Although Temasek is seen as the gold standard, we still risk collateral damage from any backlash against SWFs," he said. "We are seeing growing attempts around the world to apply regulations to cross-border transactions."

He said there were "looser definitions of national security and more complex regulations to evaluate investments on grounds of security" in the US, Germany, Canada and Japan.

Singapore and Asia account for nearly 75 percent of Temasek's investments, he said, adding developed countries like the US, and emerging economies across the world, accounted for the rest.

Temasek has been buying prime assets worldwide in a bid to grow its portfolio beyond the city-state's small domestic market.

It confirmed in July it was increasing its stake in US investment bank Merrill Lynch, a victim of the financial crisis that erupted after the meltdown in the US subprime mortgage sector.

Singapore's other government investment vehicle, the Government of Singapore Investment Corporation, has made multi-billion-dollar investments in global banking giants UBS and Citigroup, also victims of the crisis.

Sovereign wealth funds are government-created investment vehicles. They have emerged as a potent force in global markets, sparking concerns that their investment policies are too opaque and could threaten national security.

Temasek risked being affected by a backlash even though it had a record of transparency and made non-political investments, Dhanabalan said, adding it had been drawn into the controversy unwillingly.

The investment firm "is not and has never been a conventional" sovereign wealth fund as its money came neither from oil sales nor managing foreign exchange reserves, he noted.

Dhanabalan cited Morgan Stanley estimates that cumulative assets under management by sovereign wealth funds range from 2.0-2.5 trillion US dollars, a figure expected to rise to 12 trillion dollars in the next decade.

But he cautioned against exaggerating the impact of such funds.

They managed assets worth under five percent of those held by pension, insurance and mutual funds, and hedge funds and private equity players, he said.

Assets managed by sovereign wealth funds accounted for only two percent of the total size of the global equity and bond markets, Dhanabalan added.

The US had become more welcoming to sovereign wealth portfolios as it deals with the financial crisis and ensuing credit crunch, he said.

"But once the emergency has passed, foreign money may become less welcome again," he cautioned.

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