For the emerging sovereign wealth funds of the Persian Gulf and China, Temasek Holdings of Singapore is looked to as the model.

In its latest deal, Temasek, a wholly owned investment company of the Singapore government, is investing $4.4 billion in Merrill Lynch with the option of buying an addition $600 million in Merrill shares by March 28.

"This capital raising will enable Merrill's management to focus on the execution of its business strategy and deliver shareholder value," said Manish Kejriwal, Temasek's senior managing director of investments. "Our participation in this capital-raising exercise is a vote of confidence for the management team, and the underlying strengths of Merrill Lynch's franchise."

(Davis Selected Advisors will also be investing $1.2 billion in Merrill, under the deal announced on Monday.)

Temasek is a secretive company whose executive director and chief executive is Ho Ching, the wife of Prime Minister Lee Hsien Loong.

Until recently, Temasek has focused its investments in Asia. It is said to have assets of nearly $120 billion, which have been increasingly deployed overseas, mainly in China, where Temasek has been particularly active, buying stakes in several big government banks: China Construction Bank, Bank of China, and Industrial and Commercial Bank of China. It is also planning to invest $1 billion in a Chinese private equity fund run by prominent dealmaker Fang Fenglei.

Temasek has put nearly $3 billion in India, and is also invested in Indonesia and Australia. It now has an 18 percent stake in Standard Chartered, the British bank whose main business is in Asia.

The company says that its return to shareholders—compounded annually since Temasek was founded in 1974—has been 18 percent. Many analysts in Singapore say that even that impressive rate of growth may be understated.

"Temasek was deliberately incorporated as a company, with the government as its only shareholder, so that it has the operational and financial discipline to be run commercially, away from the policymaking and regulatory roles of the government," Ho Ching said at a Morgan Stanley conference last year. "When we invest, we invest strictly for returns."

Part of Temasek's success can be attributed to shrewd investment choices. For decades, Temasek has helped grow some of Singapore's most successful companies, including Singapore Airlines and the telecommunications company SingTel.

"In Asia, we have four basic investment themes: belief in the growth of Asian economies, the growing middle class as the primary driver of consumer demand, deepening comparative advantage, and companies which are emerging global champions," Kejriwal said in an interview earlier this year.

Asked about Temasek's investment strategy concerning both India and China, Kejriwal said, "We view both countries as the twin engines that will drive the Asian economy as a whole in the next few decades. Each country provides different opportunities and poses different challenges. As an equity house, with the mandate to maximize long-term returns on our investments, Temasek is keen to further deepen its connections with India, even as we look at opportunities in China and the rest of Asia.... We are a very flexible and long-term investor."  

But Temasek's investment record has not been entirely without blemish. Its purchase last year for $3.8 billion of 49.6 percent of Shin Corporation from former Thai prime minister Thaksin Shinawatra led to Shinawatra's downfall and to a paper loss of more than $1 billion for the Singaporean company.

And in neighboring Indonesia—a country that Singapore bailed out during the Asian currency crisis of 1997—Temasek was "legally and convincingly proven to have violated Article 27 of the antimonopoly law," according to Syamsul Maarif, chairman of the Business Competition Supervisory Commission. Maarif said that two Indonesian telecommunications companies partially owned by Singaporean companies—which are in turn controlled by Temasek—had colluded to make Indonesia's mobile-phone rates the most expensive in the region. Indonesia's mobile-phone market is said to be worth $6 billion annually, of which the Temasek-associated companies control 85 percent.

Maarif fined Temasek $3 million and gave it two years to sell either SingTel's 35 percent stake in market leader Telkomsel or ST Telemedia's 30 percent of Indosat, the No. 2 wireless carrier.

Temasek is now involved in a debate shaping up in India. Ho Ching took the unusual step of writing personally to Prime Minister Manmohan Singh to help resolve a dispute over mobile-phone bandwidth that could hurt the industry's growth. With more than six million new subscribers being added monthly, most of the leading mobile-phone operators have exhausted the bandwidth they had been allocated.