Temasek Holdings is a global investment company wholly owned by the Singapore government. As of 31 March 2022, Temasek manages a portfolio value of S$403 billion. Headquartered in Singapore, Temasek operates 13 offices in nine countries worldwide.
Temasek Review is an annual event where Temasek executives report its fund’s performance over the past year and discuss an array of topics regarding its investment strategies, portfolio allocation, and market outlook. While Temasek is not listed for investors to buy into, it owns some of Singapore’s largest companies like DBS Group, Singapore Airlines, and CapitaLand, and its views on the markets are of great interest to the public.
Having attended Temasek Review 2022, here are eight things I’ve learned from the conference.
1. Temasek’s net portfolio value grew to S$403 billion in 2022, up S$22 billion or a growth of 5.8% year-on-year. However, Temasek executives expect the pace of investments for the rest of the year to slow down due to a fragile global environment.
One-year total shareholders return (TSR) was 5.81%, compared to its 20-year and 10-year TSRs of 8% and 7% compounded annually, respectively.
2. Temasek has been actively investing in 2022 with net investments amounting to S$24 billion. In 2022, Temasek made S$61 billion in investments and S$37 billion in divestments. Over the last decade, the company invested S$315 billion and divested S$234 billion.
In the Q&A session, Rohit Sipahimalani, Chief Investment Officer of Temasek, mentioned that investments and divestments made are well-calculated with no compelling need to invest or divest for the sake of deploying capital. A lack of opportunities or favourable risk-to-reward investments would result in Temasek sitting on its cash pile. Lim Ming Pey, Deputy Head of Organisation & People, and Managing Director, Strategy Office, also added that Temasek faces no pressures to buy or sell any securities. Any investments or divestments made are with regards to its intrinsic values and structural trends in mind.
3. Singapore now accounts for the largest geographical market in Temasek’s portfolio at 27% in 2022, followed by China and the rest of Asia at 22% and 14% respectively. Temasek’s allocation in China fell 7 percentage points from 29% in 2020 to 22% in 2022, the only region that faced a market decline over the two-year period other than Australia & New Zealand. This was due to the overall market selloff in China amid pressures from multiple fronts, including regulatory threats, U.S.-China delisting risks, and COVID-19 lockdowns. That said, given Temasek’s over 20 years of experience in China, it remains one of the core markets that it focuses on. Today, Temasek’s portfolio remains anchored in Asia at 63% exposure.
In terms of sector segmentation, financial services (23%), transportation & industrials (22%) and telecommunications, media & technology (18%) constitute Temasek’s top three allocations.
4. Temasek has identified four structural trends which their portfolio will revolve around. These trends are digitalisation, sustainable living, future of consumption and longer lifespans. Since 2016, Temasek’s portfolio follows these trends closely, with exposure steadily increasing from 13% in 2016 to 30% in 2022.
Lim highlighted several investments made which are geared towards these trends:
|Future of Consumption||Lenskart, Roblox|
|Sustainable Living||Pivot Bio, Solugen|
|Longer Lifespans||BioNTech, Verily Life Sciences|
5. Temasek foresees the market outlook for China and Singapore to be less acute compared to Europe. Temasek views conditions in Europe as more severe due to the energy crisis resulting from the Russia-Ukraine crisis, potentially aggravating the situation. This will impact consumer income and business confidence, thereby slowing growth in Europe. On the other hand, China is at the end of its economic cycle, with risk-reward being more balanced. However, negative impacts from a recession in the U.S. or Europe will overflow to China given how interconnected countries are. For Singapore, Temasek expects a stronger recovery from the relaxation of restrictions and reopening of borders. While Singapore’s growth forecast stands at 3% to 4%, it is extremely vulnerable to impacts from other markets. Should a recession occur, Temasek expects it to be a mild one.
6. Temasek adopts a cautious investment stance given the rising likelihood of a recession in key developed markets amidst geopolitical uncertainties and tightening monetary measures. Sipahimalani mentioned that the current market downturn results solely from rising interest rates without pricing for earning declines. Temasek believes this is an inevitable phase which poses further downsides. Historically, in a bear market, prices will bottom when the Federal Reserve stops tightening; the current stance does not suggest so. As such, Temasek foresees negative conditions to last through the rest of the year and possibly further into 2023. That said, Temasek is still cautiously sourcing for investment opportunities aligned with long-term trends.
7. Exposure of cryptocurrency in Temasek’s portfolio remains minimal, as management is more focused on the underlying blockchain technology. Temasek has some investments in the cryptocurrency space which are primarily made through venture funds that invest in crypto-related companies and projects. The recent market plunge in the crypto space had minimal impact on its portfolio. Despite the hype around these cryptocurrencies, Lim added that there are a lot more components to the blockchain value chain and Temasek is focused on transformative opportunities in those areas.
8. While unlisted assets which make up 52% of its portfolio performed better than listed assets in recent years, Temasek’s allocation strategy remains the same – focusing on underlying intrinsic value regardless of whether a company is listed or unlisted.
The portfolio allocation of unlisted investments varies depending on how public markets perform. The larger allocation to unlisted assets is a resultant underperformance of public markets recently. That said, Temasek does not have a private asset allocation target but instead focuses on the opportunities, dividends, and early market inroads that a particular investment offers. In fact, Temasek might now look to dabble more into the public markets given that it has corrected.
The fifth perspective
Temasek adopts a long-term horizon for its investments. As Temasek shared its outlook and investment strategies in this year’s review, investors would notice that its primary focus is on a company’s fundamentals. Investment decisions are made based on intrinsic value and opportunities related to the identified structural trends. Despite the current negative market sentiment, Temasek avoids timing the market but instead adopts a more cautious approach while actively sourcing opportunities to further diversify and grow its portfolio.
This information is useful in providing retail investors insights into how big-name investors think and the key investment principles which they stick to despite market conditions.