Temasek Accountable To Govt On Portfolio Basis08 Mar 2007
THE SHIN CORP PURCHASE
Temasek accountable to Govt on portfolio basis
MR PATRICK Tan Siong Kuan ('Billions at stake, so Shin saga a national concern'; ST, March 3) was understandably concerned that if Temasek Holdings' investment in Shin Corp made losses, Singapore would lose national reserves. But this is not the right way to measure Temasek's performance.
Temasek invests in a broad range of assets to diversify risk and achieve good returns on the portfolio as a whole. It accepts that some investments will do well while others may fail. What is important is that the portfolio as a whole delivers creditable and sustained returns. This is the approach taken by many other reputable, long-term investors.
The Government holds Temasek accountable for achieving good long-term performance on an overall portfolio basis, rather than on individual investments each year. If Temasek were to be assessed on each individual investment, it would adopt an overly conservative investment strategy and ultimately achieve much lower overall returns.
This approach has yielded good results. As of March 2006, Temasek has delivered a compounded annual return of 18 per cent in terms of total shareholder returns by market value since inception, or 28 per cent per annum in the last three years.
For the financial year 2006 ending March 2007, despite the Shin investment Temasek is again expected to do well.
DIRECTOR (GOVERNANCE & INVESTMENT)
MINISTRY OF FINANCE