New retail private equity bond may boost retirement income

Temasek Holdings Ceo Ho Ching
Temasek Holdings Ceo Ho Ching

While S'pore has CPF, there may be a need to supplement that income: Temasek CEO

Investors can invest in Temasek Holdings' first retail private equity bond to help supplement their retirement income, said Temasek chief executive Ho Ching.

Speaking at a Stewardship Asia forum yesterday, Ms Ho said one of the things that Temasek recognised years ago is that people in Asia are living longer with better economic growth and that one of the key challenges is planning for and funding retirement.

While Singapore has institutions such as the Central Provident Fund that cater to retirement needs, there may be a need to supplement that income and companies can participate in this, she said.

"One of the things we decided to do is to try and make use of our skills and strengths to create new products for individuals to invest for their retirement," said Ms Ho, in response to a question from the audience following her speech.

Housing is a chunky investment, she said.

Beyond that home, it is not easy to invest in other assets which are inflation-linked, she added.

"So we worked very hard to kick-start the real estate investment trust (Reit).

COMING UP WITH NEW PRODUCTS

One of the things we decided to do is to try and make use of our skills and strengths to create new products for individuals to invest for their retirement.

TEMASEK HOLDINGS CEO HO CHING

"The idea of Reits is to democratise, unitise the possibility of investing in different kinds of assets in very small quantities, so the first Reit was to use shopping malls and convert them into Reits.

"The reason why we did that was, we said for the individual investors, the mom-and-pop investors and the young man or the old lady who wants to invest in the Reit of shopping malls... he or she can go to the shopping mall to see whether the shopping mall thrives, whether people are carrying shopping bags and so on," said Ms Ho.

CapitaLand Mall Trust, which owns shopping malls, was the first Reit listed on the Singapore Exchange in 2002.

Temasek is now in the process of introducing a product that allows retail investors to invest in private equity funds, she said.

"As you know, these funds are open and accessible to many of you but not necessarily to the broad masses... But by creating a product which is diversified and therefore provides a better risk-adjusted return for the individual, we can bring a new category of product to the market for the retail investor," said Ms Ho.

"So quite apart from things like housing, this is another way that we as an institution... try to bring our skills and knowledge to create products in the future for those who want to invest for their retirement."

Azalea Group, a Temasek subsidiary, is launching a private equity bond with a tranche targeted at retail investors, a structure which is believed to be a first in the world.

Azalea pioneered a similar structure here in 2016 when it launched Astrea III, a series of fixed-rate notes whose assets - comprising 34 private equity funds - have a current net asset value of nearly US$1 billion (S$1.3 billion).

Azalea has lodged a prospectus for Astrea IV on the Monetary Authority of Singapore's Opera site.

It plans to raise a total of US$500 million from the bond issuance, which comprises three tranches, each designed to target a particular risk appetite.

The least risky tranche is the Class A-1 retail offering, amounting to $242 million.

A portion of the retail bonds will be offered to retail investors for subscription via ATMs, with a minimum investment of $2,000. Details such as the yield of the bond are expected soon.

Earlier in her speech, Ms Ho said companies should not take the easy way out to retrench workers when technologies change.

Companies have benefited from workers who have been trained in schools and colleges, funded mostly by governments and families, she said.

"We should not take the easy way to retrench the obsolete when technologies change - we should not throw the problem of skill obsolescence to governments and societies."

Businesses must step up, in a tripartite partnership with governments and unions, to upskill and re-skill the workforce to be employable and future-ready, she said.

A version of this article appeared in the print edition of The Straits Times on June 05, 2018, with the headline 'New retail private equity bond may boost retirement income'. Print Edition | Subscribe