Temasek Holdings' Returns and Performance02 Aug 2023
Parliamentary Question by Ms Foo Mee Har:
To ask the Deputy Prime Minister and Minister for Finance whether the Government has data on (i) how Temasek Holdings’ total shareholder returns compare to other market benchmarks over the years (ii) how its portfolio of assets has shifted and is positioned for the future and (iii) how its portfolio of unlisted assets has performed and contributed to its overall performance to date.
Parliamentary Question by Ms Mariam Jaafar:
To ask the Deputy Prime Minister and Minister for Finance in light of the drop in Temasek's ten-year Total Shareholder Returns to 6%, how does Temasek's long-term returns vary across the portfolio and how does each segment compare to benchmarks such as the MSCI World Index and Private Equity index.
Parliamentary Question by Mr Saktiandi Supaat:
To ask the Deputy Prime Minister and Minister for Finance (a) what are the main reasons for Temasek Holdings’ worst reported returns since 2016, where the net value of its portfolio shrunk by $21 billion from 2022 to 2023; and (b) how do Temasek Holdings’ recent results compare against other sovereign wealth funds such as Saudi Arabia’s Public Investment Fund.
Parliamentary Reply by Senior Minister of State for Finance, Mr Chee Hong Tat:
Mr Speaker, with your permission, may I take the three PQs on Temasek’s performance together?
Temasek publishes its portfolio’s performance relative to various market indices like the MSCI All Country World Index or ACWI, over different horizons. The data requested by Members are generally available on Temasek’s website and Annual Reports.
Broadly speaking, Temasek has outperformed these market indices over the long term. But it is important to recognise that Temasek is not a portfolio fund manager, and the MSCI indices are not direct benchmarks for Temasek’s performance. As a bottom-up investor, Temasek invests directly in companies.
Temasek started with the Singapore companies it owned, and subsequently expanded to take stakes in companies in Asia. Temasek has only recently invested more actively in North America and Europe. Therefore, its portfolio for now is still Asia-centric, with about two-thirds exposure in Asia.
On the other hand, the composition of indices varies significantly from Temasek’s portfolio. For instance, MSCI World Index and ACWI have larger weightages to the US stock market, which has done very well over the last 10 years compared to Asian stock markets. This is why there will be occasions when Temasek’s returns are higher than the MSCI World Index and ACWI, and other occasions when the returns are not as high as these indices.
As for returns on Temasek’s unlisted assets, these have registered an Internal Rate of Return or IRR of 14.4% in the past 20 years, compared to 8% for its listed assets. Over the last decade, Temasek’s unlisted portfolio has also generated IRR of over 10% per annum, higher than its listed portfolio.
On comparisons with other sovereign wealth funds, we have previously explained that it is not straightforward to make such comparisons because the funds have different mandates, investment approaches, and risk profiles. There are also funds, like Saudi Arabia’s Public Investment Fund, that do not report their performance on the same basis as Temasek.
With regards to Temasek’s performance for the latest Financial Year ending on 31 March 2023, this was largely driven by mark-to-market losses as global investments saw a reversal of gains from the high valuations in the last 2 years.
To position its portfolio for the future, Temasek has stated that it is focused on building a resilient portfolio that can withstand exogenous shocks while capturing growth opportunities. As shareholder, the Government’s role is to ensure that Temasek has a competent board to oversee its management and ensure that its mandate is met. The Government will continue to hold Temasek accountable for delivering good long-term returns on the overall investment portfolio.