Temasek Holdings, a global investment company wholly owned by the Singapore government, manages a portfolio worth S$389 billion as of 31 March 2024. Headquartered in Singapore, it operates 13 offices in nine countries.
The annual Temasek Review, where executives discuss the fund’s performance, investment strategies, portfolio allocation, and market outlook, provides valuable insights, especially amidst rising competition and geopolitical tensions. We were invited to attend to understand Temasek’s direction and how they are navigating these challenges.
Here are seven things I learned from Temasek Review 2024.
1. Temasek’s net portfolio value (NPV) increased by S$7 billion, rising from S$382 billion to S$389 billion. This growth was driven by returns from investments in the U.S. and India, despite underperformance in their China investments.
If unlisted companies were marked to market (MTM), Temasek’s MTM net portfolio value would be S$420 billion, an increase of S$9 billion from S$411 billion.
2. Unlisted assets now account for 52% of their portfolio, a significant increase from 20% in 2004. Their diversified portfolio of high-quality unlisted assets achieved an internal rate of return (IRR) of 9% over the past 10 years, compared to 6% for the overall portfolio. Within the breakdown of unlisted assets, 31% are from Singaporean companies, while the largest portion, 35%, comes from other private companies, including early-stage ventures.
3. The latest one-year total shareholder return (TSR) is 1.6%. As shown in the chart below, the one-year TSR can be volatile, but focusing on the 10-year and 20-year TSR reveals much more stability. During the Q&A segment, the management emphasized that Temasek’s primary focus is on the 10-year and 20-year total shareholder return (TSR). Their goal is to maintain a long-term perspective and build a resilient portfolio capable of withstanding market volatility, as demonstrated by their past performance.
4. From 2004 to 2014, Temasek’s portfolio growth was bolstered by its exposure to China. However, from 2014 to 2024, China underperformed which prompted Temasek to double its exposure to the U.S. and Europe. This strategic shift contributed to their 20-year total shareholder return (TSR) outperforming both the STI and MSCI China indices.
5. Temasek’s largest portfolio exposure is the Americas, increasing from 10% in 2014 to 22% in 2024, followed by China, which decreased from 25% to 19% over the same period. Temasek plans to increase investments in India, particularly in healthcare and financial services. In China, the company will cautiously monitor government policies in 2024, continuing to invest but focusing on domestically operating companies, particularly in biotechnology and the electric vehicle value chain. In the near term, China’s pro-growth policy stance has boosted recovery, yet structural challenges persist. Without an increase in domestic demand, both growth and inflation will continue to face downward pressure.
6. Transport and industrials, along with financial services, remain the two largest sectors in Temasek’s portfolio, though their exposure has decreased over the past decade. Meanwhile, exposure to consumer and real estate, and life sciences and agri-food has increased to 15% and 9% of the portfolio, respectively. During the Q&A segment, the management mentioned that agritech is a crucial sector in Temasek’s portfolio due to the world’s increasing population and the unsustainability of traditional food production methods.
7. Going forward, Temasek will prioritise the U.S. as its largest investment destination, focusing on companies that are AI enablers and adopters and businesses positioned to benefit from U.S. industrial policy. In the near term, if U.S. inflation proves to be more persistent than anticipated, the likelihood of further rate hikes may increase, potentially creating headwinds for financial markets.
The fifth perspective
Temasek Review 2024 highlights the strategic adjustments and forward-looking investments that Temasek Holdings has undertaken to navigate a complex global landscape. The company’s increased focus on unlisted assets, diversified across various sectors and geographies, underscores its commitment to long-term growth and resilience.
Despite challenges in China, Temasek’s strategic pivot towards the U.S. and Europe has yielded positive returns, and its emphasis on sectors such as AI, agritech, and biotechnology positions it well for future opportunities.
Victor,
This is a very week performance – TSR of 1.6 pct. Just wondering did any reporter ask some tough questions at this briefing ?
Hi Ajith,
I think it’s not fair to say their performance is weak. They operate under a specific mandate and manage a massive fund. As the fund size increases, achieving growth becomes more challenging. Additionally, 52% of their assets are in unlisted assets, which are marked to market. However, I don’t think this fully reflects the true value of their unlisted portfolio.
Victor and Rusmin, I think you need to get get a contract from Temasek to train their fund managers!
Hi Jonathan,
Thank you for your kind words. Managing a massive fund like Temasek requires a specific strategy, and I believe their fund managers have admirably maintained performance amidst ongoing uncertainties and geopolitical tensions. Looking at their track record, maintaining a 7% return over the past 20 years with such a large fund is quite impressive. Even more remarkable is their 50-year total shareholder return (TSR) of 14%.