How Singapore's Sovereign Wealth Funds Should Invest

More strategic, less opportunistic. This spells things out simply. (I intend for this to be a very short blog post.)

We should not be doing too many investments of the opportunistic variety, such as taking apparently cheap equity in struggling banks. (Look where that has got us. I do not plan to look for where and how much the losses are. Suffice to say that they have amounted to billions over a very short time frame.)

Strategic investments in the obvious technologies of the future and the maturing technologies of tomorrow (... or next week) would make more sense from the point of view of national sustainability (also known as "relevance to the world").

With strategic investments in relatively young firms, growth potential exists. Furthermore, there is scope to use our large stakes to steer those firms towards collaborations with, or investments (building plants) in Singapore.

While this would remain a hit and miss process, any hit would increase our relevance to the world by putting us among other world leaders in the roll-out of some eventually ubiquitous technologies. As we have seen in the past years, capabilities spawn services. Our small size allows for an agility in roll-out that would allow our services sector to build and grow quickly locally with respect to a given capability. The next step: the world (or at least South East Asia).

In this respect, we need fewer "quantitative finance types", who mostly see value and risk as plain vanilla numbers handling our investments (this is harsh and pejorative but not too far off the mark). We need more technologists and academics, who would have a more strategic view of desired capabilities and technologies that might enable them, advising on acquisitions.

(It is my belief that fund managers with a risk profile featuring a high upside and no downside should not be running a national sovereign wealth fund.)

Our sovereign wealth funds have a unique opportunity to play a major role in bolstering our nation's future relevance to the world. Let us not throw that opportunity away.