Temasek Holdings unfazed by 'twiddles and sentiments of market'

https://www.todayonline.com/singapore/losses-ftx-egg-face-temasek-holdings-unfazed-twiddles-and-sentiments-market-ho-ching-2058696

Losses on FTX an 'egg on the face', but Temasek Holdings unfazed by 'twiddles and sentiments of market': Ho Ching

The millions of losses that Temasek Holdings made from investing in cryptocurrency firm FTX is an “egg on (the) face”, but the state investment firm “is not fazed by the twiddles and sentiments of the market”, said Madam Ho Ching, who chairs the board of its philanthropic arm Temasek Trust.

In a Facebook post on Saturday (Nov 26), Mdm Ho described Temasek’s full write down of its US$275 million (S$376.7 million) investment in FTX as one borne of a clear decision, but that was still a painful loss to bear.  

“A loss in what may turn out to be a badly managed company without adult supervision is egg on our face," said the former Temasek Holdings chief executive officer and the wife of Prime Minister Lee Hsien Loong.

“I am glad that Temasek has made a clear decision to write down this investment to zero.

“This helps clear the head on what to do as a next step, without being blinkered by wishful thinking,” she wrote in a Facebook post.

In her post, she shared a post by popular blogger Michael Petraeus, who had said it was unfair of people to blame Temasek, including Mdm Ho, for its handling of investments in FTX. Mr Petraeus is a Polish national who comments about Singapore-related issues on his blog, Critical Spectator.

FTX had filed for bankruptcy earlier this month after it struggled to raise billions in funds to stave off a collapse while coming under heightened regulatory scrutiny.

Following the firm’s move, Temasek said it would write down its investments in the company, which had been one of the largest crypto exchanges in the world, with a high trading volume and also counted institutional investors such as venture capital firm Sequoia Capital.

Temasek had said following FTX's bankruptcy filing that it had invested US$210 million (S$288.58 million) for a minority stake of about 1 per cent in FTX International, and US$65 million (S$89.32 million) for a minority stake of about 1.5 per cent in FTX US, across two funding rounds from October 2021 to January 2022.

The cost of its investment in FTX was also 0.09 per cent of its net portfolio value of S$403 billion as of March 31, said Temasek in a statement on its website on Nov 17. 

In her post, Mdm Ho said that some of Temasek’s best investments were made by being contrarian. She said that Temasek could afford to do so as it has its own balance sheet and can plan for investments long term.

“With a long-term stance, and all the pros and cons that come with that stance, Temasek is not fazed by the twiddles and sentiments of the market.

“But FTX is not a market volatility issue, and is a reminder that good intentions are not good enough,” said Mdm Ho.

Mdm Ho then called on everyone to “keep calm” on the losses while Temasek continues to “tend to the fields and fry other fishes”, in reference to other investments made by the sovereign wealth fund.

In response to a comment on her post by Facebook user Fu Lingdong, who had said that some people only saw Temasek's loss of about S$400 million due to FTX and ignored its investment gains from previous years, Mdm Ho said that people should never take the attitude that the loss is "S$400 million only".

This amount can pay utility bills or go towards other investments, said Mdm Ho. 

She said that while taking risks is part of an investor's life, it is "the start of a slippery slope" if an investor does not feel pain from his or her losses. 

At the same time, an investor must not allow the pain from an investment loss to "paralyse the mind or to throw good money after bad", she added.

Mdm Ho’s comments on Facebook came more than a week after Temasek’s statement on its investments in FTX.

In its statement on Nov 17, Temasek said that its “thesis” for its investment in FTX was to “invest in a leading digital asset exchange providing us with protocol agnostic and market neutral exposure to crypto markets with a fee income model and no trading or balance sheet risk”.

It added that there have been “misperceptions that our investment in FTX is an investment into cryptocurrencies”.

Temasek also said that it had conducted an “extensive due diligence process on FTX, which took approximately eight months from February to October 2021”.

“During this time, we reviewed FTX’s audited financial statement, which showed it to be profitable.”

The firm said it recognised that “while our due diligence processes may mitigate certain risks, it is not practicable to eliminate all risks”.

The firm said of FTX’s founder: “It is apparent from this investment that perhaps our belief in the actions, judgment and leadership of Sam Bankman-Fried, formed from our interactions with him and views expressed in our discussions with others, would appear to have been misplaced.”