The world's biggest hedge fund?

24 April 2007 By Martin Hutchinson

The government is slowly moving towards a more aggressive approach to its $3.8tn portfolio. The model is Singapore s Temasek. Japan won t easily match Temasek’s 18% annual return. Its fund is too big and it is starting too late. But active management is a good idea.

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Japan is considering establishing a state investment fund modelled on Singapore's Temasek Holdings to manage part of its $909bn foreign exchange reserves. A breakup of the Government Pension Investment Fund, with assets of 160tn yen ($1.3tn) is also being considered.

Temasek, founded in 1974, manages S$129bn ($80bn) of investments for the Singapore government. 44% of Temasek's assets at March 31, 2006 were in Singapore, 34% in the rest of Asia and 20% in nonAsian OECD economies. 17% of total assets were unlisted equities, 57% listed large blocks, where Temasek ownership was more than 20% and 16% liquid assets. Temasek's compounded annual return by market value was 24% in the year to March 2006 and 18% over the 32 years since inception, but only 6% over the 10 years to 2006. Temasek does not invest in third party funds although it controls a fund management company Fullerton Fund Management that manages thirdparty money.

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