Temasek doubles down on digital investments in post-Covid world
One impact of the pandemic is how it has accelerated the trend of digitalisation in how people work, spend and play. This big trend has also guided Singapore’s Temasek Holdings in its investments. “When you look at what happened during Covid-19 last year, all of us working from home, what does it mean? It means that digitisation and... payments have become a very, very prevalent area,” says Nagi Hamiyeh, joint head of Temasek’s investment group, and head of portfolio development. “E-commerce has been a very, very important area,” says Hamiyeh at the July 13 release of Temasek’s annual review for FY2021 ended March 31.
The pandemic, according to Singapore’s state investment firm, has “refreshed” its views on four global, structural trends: digitisation, sustainable living, future of consumption, and longer lifespans.
Temasek is careful to maintain a diversified portfolio but there is a discernible bias in favour of technology, financial services, industrials and energy sectors, which continue to see significant investment activity.
For the year ended March 31, 2021, Temasek’s portfolio was 24% allocated in financial services and 21% in telecommunications media and technology. These two are the largest sectors. However, their compositions have changed significantly over the last decade, partly driven by digitisation.
Fock Wai Hoong, Temasek’s managing director for investment, explains that previously within the financial services sector, Temasek was mainly invested in banks. It has now shifted the focus to include more exposure to insurance, FinTech and payments platforms. According to Fock, these new segments now make up almost half the financial services industry portfolio.
In a June 4 report, BusinessWire reported that the transaction value for the global digital payments market was US$5.44 trillion ($7.37 trillion) in 2020, and it is projected to be worth US$11.29 trillion by 2026, registering a CAGR of 11.21% during the period of 2021–2026.
In addition, the pandemic, according to Temasek, has “made it clear that e-commerce can be an important tool/solution” helping firms, especially SMEs, collect payments remotely instead of necessitating a physical cash-for-goods exchange. “This is expected to substantially spur the growth of digital payment methods across various economies,” Temasek notes.
Putting its money where its mouth is, Temasek has invested in a number of different payments and financial technology businesses. They include FNZ, a UK-based wealth management services platform; Nium, a Singapore start-up that facilitates global digital payments and card issuance; and Flywire, a cross-border payment service platform, which was recently listed in the US.
Closer to home, the firm invested in New York Stock Exchange-listed Sea, the parent company of e-commerce platform Shopee. Sea, which is better known in its earlier years for its Garena gaming platform, is steadily pushing for the adoption of its digital payment platform as well.
Sea’s share price has grown explosively on the back of the e-commerce boom, from US$16 five years ago to US$280 as of July 14, giving it a market value of about US$145 billion — 2.5 times larger than DBS Group Holdings’ $77.5 billion.
Fock says Temasek is “optimistic” on this sector, pointing to the e-Conomy SEA 2020 report done by Google, Temasek, and Bain. The report highlights that Southeast Asia’s Internet sectors “continue to see strong growth, hitting US$100 billion in 2020, and are on track to cross US$300 billion by 2025”.
Temasek is also a shareholder of Indonesia-based Tokopedia, which has since merged with ride- hailing app Gojek to form GoTo Group, as well as a shareholder of Grab, the Singapore-based “super app”.
Furthermore, the firm’s technology, media, and telecommunications exposure has also grown beyond telecoms to include more media and technology investments. Temasek added that it now has a strong focus on the technology space as digitisation has become a mainstream enabler. This includes software, Internet, e-commerce, the sharing economy, cloud computing and digital content.
Some investments made in this space include technology investments like Roblox, a US-based online entertainment platform, and Snyk, a UKbased software developer of cybersecurity tools.
But Temasek’s investments are not just in companies that are riding the wave of the recovery of Covid-19. It has also put money into digital solutions combating the fallout from the disease itself.
Notably, one of Temasek’s portfolio companies is German biotechnology firm BioNTech, better known for developing one of the first Covid-19 vaccines alongside American pharmaceutical giant Pfizer. But besides the vaccine, BioNTech is also focused on next generation cancer treatment solutions.
Furthermore, investee companies in its life sciences portfolio pivoted to support Covid-19 efforts. One such example is US-based Vir Biotechnology, an investee company in the US, who made an early pivot to work on antibodies to treat Covid-19, while others worked on using AI to identify existing drugs which could be repurposed or combined to treat Covid-19 at various stages of illness.
Despite all these investments into large, bigname companies, Temasek is not ignoring the smaller players. It has its so-called blockchain and AI pods, which are pilot groups to explore opportunities in AI and blockchain technologies.
After a year in incubation, Temasek’s blockchain pod founded LemmaTree, a group of blockchain companies that uses decentralised technologies to empower individuals and organisations to control their data.
Affinidi, a LemmaTree company, applies digital credentials technology towards facilitating safe travel. Headquartered in Singapore with a hub in Berlin, Affinidi enables mobile verification of users’ Covid-19 testing and vaccination status. With global vaccination underway, this technology could prove pertinent when air travel resumes.
The start-up is headed by Glenn Gore, who moved to Affinidi as CEO in November 2020 from his former role as chief architect at Amazon Web Services in Seattle.
Two other businesses are being built using Affinidi’s technology: GoodWorker, an India-based digital job matching platform for blue-collar workers and employers; and Trustana, a Singapore-based B2B marketplace and trade platform connecting verifiable, international partners for seamless cross-border trade, with an initial focus on SMEs in China and Singapore.
“As a forward-looking institution, we seek to make a difference by developing human potential. We believe this will, in turn, build and sustain our portfolio, our institution and our wider communities. We build capabilities with tomorrow in mind, always working to anticipate future trends, threats, and opportunities,” says Temasek.