Use Of Seed Capital In Co-Investment Programme
16 Oct 2012Date: 16 October 2012
To ask the Deputy Prime Minister and Minister for Finance:
(a) how much of the S$250 million of seed capital earmarked in the Co-Investment Programme (CIP) to nurture globally competitive companies has been committed to date; (b) how long is the investment horizon and what is the return on capital that the Ministry expects from this investment; (c) what is the Ministry's assessment of the impact that this scheme has made to facilitate local companies to go global.
Reply by DPM and Finance Minister Tharman Shanmugaratnam:
Mr Ong Teng Koon has asked about the progress of the Co-Investment Programme (CIP), where Government provides seed capital to catalyse patient growth capital from the private sector to nurture Singapore-based globally competitive companies. Phase 1 of the CIP was launched in December 2010, with Heliconia Capital Management Pte Ltd (“Heliconia”) as Government’s fund manager. The CIP comprises two funds. First, the SME Catalyst Fund, which is the primary mode of operations of the CIP, whereby the Government’s capital will be managed and matched by private equity fund managers. And second, the SME Co-Investment Fund, which is used to co-invest with fund managers on a deal-by-deal basis.
To-date, we have committed a total of S$135 million of seed capital to two private equity funds and two co-investment deals under the CIP. This has catalysed over S$200 million from the private sector. Heliconia is evaluating a pipeline of investments and we are optimistic that Phase 1 of the CIP with remaining seed capital of $115 million would be fully taken up with more investment commitments over the next few years.
The length of the investment horizon will vary from investment to investment. The individual private equity funds that the CIP invests in will typically be for a term of eight to ten years. Whilst the CIP was set up with the objective of nurturing globally competitive companies, it is healthy to subject the management of Government’s CIP capital to commercial discipline. This will mean that we expect the investments to make reasonable returns.
The CIP has been in operation for only about a year. As it is meant to provide patient growth capital to investees, it may be premature to judge its effectiveness at this point. We understand that some investee companies intend to use the seed funding for acquisitions, expansions, and investing in capital expenditure for upcoming multi-year projects with key customers. We will continue to assess the impact of the CIP as investments are made and mature over time.