Published February 7, 2009

breakingviews.com

Outsider in

By UNA GALANI

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TEMASEK is breaking the mould. The Singaporean sovereign wealth fund has appointed a foreign national, former BHP Billiton boss Chip Goodyear, as its new chief executive. The succession may be planned and orderly, but that doesn't make it any less radical. Mr Goodyear replaces Ho Ching, the prime minister's wife who has led the investment group for six years. The move makes Temasek the first large sovereign fund to appoint an outsider to such a prominent role.

While it's not unusual for sovereign funds to hire international financiers for managerial positions, these state investment vehicles like to keep a national face. The Abu Dhabi Investment Authority's board is made up exclusively of Emirati nationals. Kuwait and Qatar's sovereign funds are no exception. Even Norway's sovereign fund - typically seen as the gold standard in openness - is dominated by Norwegians at board level.

True, Mr Goodyear isn't taking the really top job of chairman, which is still held by S Dhanabalan, a Singaporean. But Ms Ho was widely regarded as Temasek's key decision maker. There's no reason to believe that will change when Mr Goodyear takes over. His appointment may even finally help convince sceptics that Temasek, which has US$123 billion under management, operates at arm's length from the state. Mr Goodyear's mining expertise makes him an unusual hire in a fund that has sealed its reputation as an aggressive investor in the financial sector.

Under Ms Ho, financial services grew to account for about 40 per cent of Temasek's portfolio as it expanded beyond its traditional Asian market. But after years of record-breaking profits, the sovereign fund is now nursing losses on some large investments. Its US$5 billion bet on Merrill Lynch is worth around US$2 billion. Temasek is also sitting on large paper losses on Standard Chartered and Barclays.

Ms Ho's long-planned departure isn't related to these sorry financial investments. But Temasek might still benefit from a change of direction. And Mr Goodyear could hardly set a more different tone.