- This evolution marks Southeast Asia’s sovereign wealth funds’ transition from regional champions to global stewards, aligning capital with transparency, ESG goals, and long-term resilience.

In July 2024, Singaporean sovereign wealth fund, Temasek Holdings, announced that it plans to invest US$30 billion in the US market over the next five years, positioning North America as its single largest destination for new capital deployment. A few months later, Khazanah Nasional Berhad,  Malaysia’s sovereign wealth fund, followed suit, making an important acquisition into California-based AI company Syntiant Corp.  

At first glance, these high-profile commitments by arguably two of the best-known sovereign wealth funds in Southeast Asia could be read as a reaction to shifting geopolitical winds. Both Temasek and Khazanah are seemingly hedging against increasingly volatile US policy maneuvers, especially in the runup to the hotly contested November 2024 presidential election, which saw former President Donald Trump (2017-2021) recapturing the White House. Yet such an interpretation risks mistaking coincidence for causation. A careful reading of both funds’ annual reports reveals that their exposure to China, once the core of their Asian holdings, has been declining steadily for years, long before terms like ‘decoupling’ and ‘de-risking’ entered the global financial lexicon.

This rebalancing reflects fundamentals rather than short-term political expediency. Firstly, China’s era of extraordinary expansion has given way to slower, more domestically constrained growth. Secondly, in tandem with a decelerating Chinese economy, the most attractive investment opportunities now lie in markets (especially the US) offering deeper liquidity, more robust innovation systems, clearer governance standards, and other structural advantages. Lastly, Temasek and Khazanah have also matured, with an eye towards environmental, social, and governance (ESG)-conscious investment themes. Their shift westward therefore aligns less with geopolitical sentiment than with a recalibration towards markets that better reflect their evolving mandate and long-term stewardship goals.

Some Stocktaking

According to Table 1, China represented the crown jewel of Temasek’s foreign portfolio for a considerable period over the last decade. Indeed, between 2019 and 2021, Temasek’s China assets equaled or exceeded those held in its home market of Singapore. However, its China-centric orientation has clearly tapered off by 2020. The money has since been distributed to other destinations, especially the US (and to a smaller degree, other North American economies). As of 2025, the allocation towards the US accounts for Temasek’s largest destination outside Singapore.

Table 1: Geographical Distribution of Temasek’s Investment Portfolio, 2016-2025 (%)

Source: Calculated from annual reports by Temasek.

Khazanah shows a similar pattern. As illustrated in Table 9.2, China’s weightage peaked at 14% in 2020 before witnessing a secular decline. The US market, on the other hand, gradually rose in importance between 2018 and 2023, growing by a factor of 16 during this period. In 2023, the US ranks as Khazanah’s largest overseas portfolio, outpacing not only China, but also Asia (Ex-China).

Table 2: Geographical Distribution of Khazanah’s Investment Portfolio, 2018-2023 (%)

Source: Calculated from annual reports by Khazanah.

The Chinese Dragon: Still Soaring?

Until the early and mid-2010s, China epitomized opportunity for global investors. Temasek and Khazanah thrived on that momentum, taking stakes in Chinese banks, logistics firms, and technology giants such as Alibaba. By the second half of the 2010s, however, that equation had changed. Gross domestic product (GDP) growth began to decelerate, marking a clear break from the double-digit levels that it used to enjoy. Overcapacity and soaring government debt, amongst other issues, furthered hampered economic expansion. Well-meaning interventions, especially the rapid lock down of major Chinese cities during the COVID-19 pandemic, had the unintended effect of disrupting supply chains and people-to-people exchange.

In the technology sector, the early 2020s crackdown on Ant Group (financial services) and Didi Chuxing (ride-hailing) generated broader investor uncertainty. For Ant Group in particular, it was poised to raise US$34.5 billion in the world's largest initial public offering (IPO) at the time. However, on the eve of the IPO, the Chinese government stopped the process from moving forward, citing various regulatory concerns. It was also reported that some of China’s top leaders were involved in the decision-making process. Such incidents only serve to remind investors about the relative lack of maturity of the Chinese equity market. While Chinese technology firms are undoubtedly innovative and wealthy, the wider regulatory environment can occasionally catch them off-guard, with severe financial ramifications. To sum up, Temasek and Khazanah’s reallocation of capital away from China is not a political act. Rather, it is a pragmatic response to declining risk-adjusted returns.

The Allure of the US: Liquidity, Innovation, and Predictability

As China’s risk–return profile narrowed, the US emerged as the logical counterweight. As illustrated in Tables 1 and 2, both Temasek and Khazanah have, over the last few years, pivoted towards the US. These shifts are cumulative rather than abrupt, reflecting structural confidence in the US market. The COVID-19 period accentuated these strengths. Even amid global turbulence, US equity and venture markets remained open, generating booms in digitalization, life sciences, and renewable energy. Temasek’s participation in firms such as Airbnb, Databricks, and Impossible Foods illustrates how it leveraged pandemic-era disruption to capture long-term structural themes.

Khazanah also made a big push to expand its presence in the US. Khazanah’s public materials and major financial press reports indicate that the fund has increased US exposure largely via public equities and fund stakes, rather than via large direct buyouts of named US corporates post-2019. For the latter, there has been only one clearly prominent, publicly announced deal – the aforementioned investment into AI firm Syntiant Corp.

The appeal of the US lies not only in commercial returns, but also in system integrity. Firstly, it hosts the world’s broadest capital and debt markets, providing sovereign investors like Temasek and Khazanah depth, choice, and liquidity. Secondly, the US still dominates frontier industries such as AI and healthcare, even despite the gains made by their Chinese counterparts in recent years. Thirdly, its regulatory environment, though apparently weakening in recent years, remains transparent and enforceable. This, in turn, provides institutional predictability. While sanctions imposed by the US on China might have swayed key Temasek and Khazanah executives to divest from China, they would not likely have increased their bets on the US if the latter did not possess these attributes.

Investing the Singaporean and Malaysian Way: From National Champions to Global Stewards

The most profound transformation, however, lies within the funds themselves. Temasek and Khazanah have increasingly become globally networked, purpose-driven investors. This sophistication mirrors Southeast Asia’s incremental evolution toward professionalized capitalism. Such an evolving mandate naturally orients them toward transparent, innovation-rich markets. The geography of investment, in other words, reflects the institutional maturation of these two nations’ state capital.

Temasek’s reinvention is instructive. It now structures its strategy around four thematic priorities — Digitization, Sustainable Living, Future of Consumption, and Longer Lifespans. These themes guide portfolio construction, steering the fund towards ecosystems that combine profitability with long-term societal value creation. By the same token, this orientation pushes Temasek deeper into advanced markets such as the US (and to a lesser extent, Europe), where ESG standards, disclosure regimes, and overall economic vibrancy align with its institutional ethos.

Khazanah’s transformation follows a complementary but distinct path. Its Dana Impak initiative, launched in 2021, integrates social and environmental objectives into investment decisions. While the fund continues to nurture national champions in industries vital to Malaysia’s competitiveness, Khazanah has increasingly extended its reach into the US technology ecosystem. This reflects a conscious effort to embed Malaysian capital within global innovation networks.

Investing in China, to some extent, is inconsistent with these two funds’ institutional logic. China’s relatively limited data transparency, unpredictable policy shifts, and constrained exit mechanisms, to name a few factors, sit uneasily with the modern governance framework of Temasek and Khazanah. By contrast, the US and other developed markets provide them with a steady flow of bankable projects aligned with redefined missions.

Conclusion: Structural Diversification, not Geopolitical Decoupling

To frame Temasek’s and Khazanah’s investment decision as a mere reaction to geopolitics is to misunderstand the nature of sovereign capital.  Their reorientation reflects a deliberate, albeit gradual, response to changing global fundamentals: slower Chinese growth, the renewed appeal of the US market, and the growing sophistication of Temasek and Khazanah themselves. These are long-term adjustments shaped by fundamentals, not ad hoc, tactical reactions to political headlines. Phrased differently, the same capital that once chased returns in the Pearl River Delta now seeks opportunities in the San Francisco Bay Area and the Boston biotech corridor.

The policy lesson is clear. In an era of slower global growth and heightened geoeconomic competition, sovereign wealth funds must pair commercial discipline with strategic flexibility as they construct portfolios that can absorb shocks while capturing innovation-driven upside. Temasek and Khazanah illustrate what this model looks like. Their experience underscores a timeless truth – capital endures by adapting, not by clinging to yesterday’s miracle.