Temasek to increase exposure in AI, core-plus infrastructure
AI is a 'two-decade opportunity' with the potential to transform industries, said Chia Song Hwee, the deputy chief executive officer of Temasek. Core-plus infrastructure 'provides resilient, risk-adjusted returns and stable cash use', said Temasek's management in a media briefing for the launch of its annual Temasek Review released on Wednesday (Jul 9).
These asset classes are part of Temasek's global direct investments, which make up 36 per cent of its portfolio. Temasek's Singapore-based portfolio companies and partnerships with other investors and asset management companies make up 41 and 23 per cent of its portfolio, respectively.
In the AI space, Temasek is looking to increase its opportunities across the value chain. This includes AI companies that are growing at an 'exponential pace', physical infrastructure to support AI and emerging AI innovators that can disrupt the market. Some of the companies that Temasek has already invested in include chipmaker Nvidia and software company Intapp.
Temasek has set up AI-related ventures which can work with its portfolio companies to improve their value. For example, it founded software company Aicadium in 2021 to provide AI solutions to companies. It has also invested in AI funds such as AI Infrastructure Partnership, which is backed by Microsoft and BlackRock.
Core-plus infrastructure
Temasek is also looking at core-plus infrastructure, a type of infrastructure asset class that is riskier than traditional infrastructure, but safer than growth infrastructure investments. They include assets such as data centres, infrastructure to support energy transition infrastructure and ageing infrastructure that needs to be replaced.
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Temasek is deploying its capital into this asset class in a few ways. It is doing so directly through its portfolio companies that have deep expertise in the area and through investments in funds. It is also partnering global investors, such as in its partnership with Brookfield to acquire a stake in French renewable energy producer Neoen.
Lim Ming Pey, the chief of staff at Temasek's executive office, told The Business Times that when it comes to its global direct investments, Temasek prefers to invest in companies that have a track record of stable cash flow, have access to a large domestic market, and have a relatively resilient supply chain.
'Such companies are better protected against the risk of tariffs or other geopolitical impacts,' said Lim.
In the past year, Temasek has invested in Indian snack company Haldiram's, Neoen and China's largest restaurant operator Yum China.
Alternative assets will also be an 'important return driver' for Temasek in the years ahead, said Lim. These assets mostly form the third segment of its portfolio, which consists of investments in funds, partnerships with other investors and asset management companies.
Alternative investments help to diversify Temasek's portfolio beyond equities and potentially generate higher risk-adjusted returns.
To that end, Temasek is increasing its exposure in areas such as private credit and hybrid solutions, private equity funds, as well as liquid alternatives and uncorrelated strategies that include hedge funds, closed block insurance and royalties.
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