Frankfurt Apparently, the looming recession in Germany is not deterring investors – especially when it comes to investments in medium-sized companies and in listed technology leaders. “We are currently taking a closer look at half a dozen German companies,” says Uwe Krüger, European head of Temasek International, the sovereign wealth fund from Singapore.
The 58-year-old manager said in an interview with the Handelsblatt that there was great respect for the performance of family businesses, medium-sized companies and start-ups in Germany.
Sovereign wealth funds like Temasek are considered one of the most powerful investor groups around, and their influence continues to grow. Assets under management have grown at an 8 percent annual rate since 2011 to reach $7.8 trillion by the end of 2020, according to Preqin.
Temasek manages a portfolio of 403 billion Singapore dollars, which is the equivalent of 297 billion US dollars. Twelve percent of this is invested in Europe. In the past fiscal year (March 31), Temasek achieved a return of 5.81 percent.
The average for the past ten years has been seven percent and eight percent for the past 20 years. For comparison: the Norwegian sovereign wealth fund has achieved an average return of 5.8 percent since it was founded in 1998.
German favourites
Krüger cites his participation in Hydrogenious LOHC Technologies as a prime example of his investment strategy. The company from Erlangen helps to solve transport problems with green hydrogen.
Overall, there are outstanding technology and industrial companies in the leading index Dax 40 and in the MDax, the stock market barometer for medium-sized stocks. “Electromobility and technologies that contribute to the energy transition are two areas that we deal with intensively when we look at the two indices,” says Krüger.
Despite the war in Ukraine and a possible economic downturn, Temasek still sees Europe positively, in contrast to many other major international investors. As a very long-term investor, we want to keep investing here in the years to come.
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In addition to Biontech, Hydrogenious Technologies and the booking platform Getyourguide, the Temasek portfolio includes investments in the travel platform Omio, in Haldor Topsoe, a Danish company for chemical catalysts and energy conversion technologies, in Element Materials in Great Britain (testing laboratories) and two investments in the field of fusion reactors. “We believe in a future of fusion energy. We already have stakes in the start-ups Commonwealth Fusion Systems and General Fusion,” explains Krüger.
The strategy of the sovereign wealth fund
Temasek invests around 30 to 35 billion Singapore dollars per year, i.e. around 20 to 25 billion euros. The sovereign wealth fund is based on four structural trends. First is “Sustainable Living”, which includes, for example, investments in renewable energies, second is digitization and third is everything to do with the term “Longer Lifespan”, with Temasek being interested in the use of artificial intelligence in healthcare, for example.
And fourthly, investments in platforms such as the Getyourguide booking platform or in digitized agriculture fall under the “Future of Consumption” key theme. But not all investments work at Temasek either, and that also applies to a large German corporation.
Problem case Bayer
The best-known German investment by Temasek is probably the minority stake in Bayer, with which they were not really satisfied for a long time. “At Bayer we are in constructive dialogue with the Chairman of the Supervisory Board. Our concerns about the performance of the company and the share have been fully understood,” says Krüger. “But there is still a lot to do, we believe that we have only done about a third of the way.”
From Temasek’s point of view, there is important homework in the area of overhead costs, the strategic focus and the general structure of the company. There are currently no plans to increase the stake from three percent as of March 31, 2022.
preparing for the crisis
In the coming year, the portfolio companies of the sovereign wealth funds will need even more attention because of the looming recession. That’s why Temasek has increased the frequency of supervisory board meetings, for example.
The Temasek European boss continues to see Europe positively despite the Ukraine war and a possible economic downturn.
Many sovereign wealth funds are concerned about the confrontation between Washington and Beijing, and that also applies to Temasek. “What concerns us very much are the growing tensions between the USA and China. We have to adapt and react to this, after all, 22 percent of the entire portfolio is currently in China.”
However, Krüger warns of the danger that the megatrend of sustainable investing, i.e. investments in so-called ESG products, will take a back seat due to geopolitical upheavals.
“We want to halve the net carbon emissions of our portfolio by 2030,” he says. That’s a challenging goal for the sovereign wealth fund, which owns a majority stake in Singapore Airlines, for example.
Victims of the crypto bust
The biggest glitch at Temasek in recent months has occurred outside of Kruger’s region, but the collapse of Bahamas-based crypto exchange FTX is also a headache for the sovereign wealth fund’s European head. Temasek had to write off the entire FTX investment of over $275 million.
Although this will “not have a significant impact on our overall performance, we take every investment loss seriously and will learn our lessons from it,” says Krüger.
Notwithstanding the FTX case, Temasek still believes the blockchain technology and market platforms behind cryptocurrencies like Bitcoin are good areas to invest in. According to Krüger, however, there will be no direct investments in cryptocurrencies.
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