Ben Bland
A monkey throwing darts at the share pages of the Financial
Times could have made bucket loads of cash over the last year. But
Singapore's super-smart sovereign wealth funds, which lost billions
of dollars by investing in Western banks at the height of the
bubble, seem to be having renewed difficulties even while every
other Joe is lining their pockets.
The estimated $675 million that the Government of Singapore Investment
Corporation (GIC) appears to have lost on a
bad property investment in New York is arguably
the least of Singapore's overseas investment problems.
Any investor can make a bad individual call and you have to take
the rough with the smooth.
What's more worrying is the emerging governance crisis at
Malaysia's Alliance Bank, in which Temasek is a key shareholder,
having bought a 29 percent stake in 2005 and parachuted in a new
chief executive and several directors. (For those of you who don't
know, Temasek is an "Asia investment house headquartered in
Singapore" - a Singapore government euphemism for a sovereign
wealth fund.)
The exact details of the problems at Alliance Bank remain
unclear but the company has confirmed that it is
conducting an internal
investigation into a corporate governance
related issue.
Chief executive Bridget Lai, who was
headhunted by
Temasek from her previous job Standard
Chartered, is currently on leave (and will be for another two
weeks) while this investigation is carried out. Chief operating
officer Shim Kon Tek is also on leave.
But Lai remains chief executive and stated earlier this month
that rumours that she had resigned were "wholly untrue" and "highly
defamatory".
An analyst who attended an investor briefing by the company on
Friday hinted that the investigation "was purely a disciplinary one
related to branch refurbishment contracts whereby due procedures
were not followed in relation to filing of paperwork and checks
over external renovators’ qualifications," according to a
Malaysian press
report.
While the details are sketchy, companies do not normally send
their chief executive and number two on leave pending an internal
investigation for no reason. Unsurprisingly given the lack of
information, investment banks have rushed to downgrade their
recommendations on Alliance.
Temasek, like other sovereign wealth funds, is under more
pressure than ordinary fund managers to uphold high standards of
corporate governance. Yet something seems to have gone wrong on
Temasek's watch at Alliance.
And make no mistake. Although Temasek only owns 29 percent of
the shares, it is a key driver behind Alliance. Not only is the CEO
a Temasek appointee but four of the nine other board
members are current or former Temasek
employees.
Singaporean government officials love to lecture their Malaysian
counterparts on issues of transparency and governance. On this
occasion, it appears the Singaporeans will have little to brag
about.