Temasek was founded in 1974 to take over assets that were held by the Singapore government. This ensured Singapore’s investments are professionally managed.
How these investments perform should be of interest to everyone in Singapore. This isn’t just because Temasek’s portfolio is part of Singapore’s national reserves. Each year, a significant percentage of Singapore’s spending is derived from Net Investment Returns Contribution (NIRC) – from Temasek and GIC.
In 2021, NIRC amounted to over $20.3 billion. This makes it the single largest contributor to the Singapore budget, or about a fifth of the government’s income. In 2022, the NIRC is estimated to be $21.6 billion.
Temasek released its latest FY2022 results on 12 July 2022, and here are 5 things we learned about its portfolio.
Read Also: Singapore’s National Reserves: What Is It And What Can They Be Used For?
#1 Temasek’s Portfolio Grew To $403 Billion (A Record High) In FY2022
Temasek’s portfolio value grew to $403 billion as of 31 March 2022. This is $22 billion higher than its portfolio value in FY2021 – and also a record high following strong growth since the pandemic in 2020.
As we can see from the chart below, the rise in portfolio value has also been steadily increasing.
Source: All charts from Temasek Review 2022
We can look even further back to see how Temasek’s portfolio value has shown resilience through numerous market downturns. While each pandemic depressed its portfolio value, Temasek has managed to increase its portfolio value subsequently.
Along with its growing portfolio value, Temasek’s dividend income has also shown strength and an uptick over the past one and a half decades. In FY2022, it collected $9 billion in dividends – higher than the year before, but still lower than its peak in FY2020.
#2 Total Shareholder Returns Was 5.8% in FY2022
In FY2022, Temasek’s total shareholder returns was 5.8% (in Singapore dollar terms). This generally beat the broader market indexes.
Looking at the longer-term, Temasek’s returns over the past 10-year period is 7% per annum, while its 20-year returns is 8% per annum. While this is commendable, the chart below shows a clear decline in its total shareholder returns in recent years. Nevertheless, this still looks to be in line with broad market performances over recent timeframes.
We can also review Temasek’s performance on an annual basis in the chart below. However, we see that while 1-year returns can be quite volatile – with huge swings up and down – its 10- and 20-year returns are much more stable.
This is important for any portfolio, let alone one that Singapore’s annual budget is relying on for long-term expenses.
#3 Temasek Invested $61 Billion, Divested $37 Billion
Temasek is also an active investor. In FY2022, it invested $61 billion, while it divested $37 billion. We can also see from the chart below that it has ramped up its investment and divestment activities in recent years.
In the early 2000s, there were not much investments and divestments. However, looking at the tail-end of the chart, we can see that this has significantly ramped up recently.
Furthermore, in its press release, Temasek states that its portfolio construction has been guided by long-term structural trends since 2016. Its portfolio companies are increasingly geared towards the megatrends of Digitisation, Sustainable Living, Future of Consumption and Longer Lifespans.
In addition, Temasek also states that it “engage closely with our portfolio companies as they assess potential disruption risks and transformation opportunities arising from these trends”. Temasek states that its portfolio exposure to these trends have increased to 30% in 2022, from 13% in 2016.
Also, a large chunk of materials speaks about its ESG initiatives. It will be no surprise that Temasek also encourages its investee companies to achieve better environmental outcomes, especially since it has a goal to achieve net zero carbon emissions by 2050.
#4 Temasek Biggest Exposure Is To Singapore
Temasek’s biggest exposure is to Singapore. While we may think this is only natural, we can see that this is a shift from the past couple of years, when exposure to Singapore declined. In contrast, its exposure to China declined, after increasing in more recent years.
This may be down to broad marker factors such as its hefty investments into Singapore companies. In 2021, it invest $6.2 billion in SIA, and also took part in Olam’s and Sembcorp Marine’s rights issues.
On the other hand, the Chinese markets have also been depressed in the recent year, as uncertainties over its crackdown on tech stocks persist. Nevertheless, Temasek has pressed on with its investments in new economy sectors in China, including VX Logistics, a dry warehouse and cold chain developer and operator, Shanghai Propulsion Technology, a hydrogen fuel cell developer, and Whale technologies, a digital marketing tech company.
In totality, Temasek’s exposure to Asia remained stable at 63% in 2022 (compared to 64% in 2021). Hence, its exposure to other regions also remained relatively stable compared to last year.
#5 Unlisted Assets Surpasses More Than Half Its Portfolio
Temasek’s portfolio has also been increasingly shifting to the unlisted space. In FY2022, its unlisted assets crossed the 50% mark – comprising more than half of its portfolio now. Its unlisted assets now make up $210 billion of its portfolio value.
Temasek states that this was due to an increase in the value of quality unlisted assets. A large chunk of its returns from such unlisted assets will come when they are listed or sold. Part of its assets of mature unlisted assets, such as Mapletree, SP Group and PSA also provides a steady stream of dividends.
To get a foothold in the megatrends that Temasek wants to invest in (highlighted above), it also needs to look at early stage companies. Nevertheless, only less than 10% of its unlisted portfolio is in early-stage companies.
Looking at the broad sectors that Temasek is exposed to, we can see that it has remained relatively stable. The increase in exposure to Transport & Industrial perhaps points to its investments in SIA and Sembcorp Marine. The dip in its telecommunications, Media & Technology sector also speaks of the uncertainties and volatility in the sector.
Read Also: 6 Things To Know About Temasek’s T2026-S$ Bond Before Investing In It
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