• Temasek’s annualised total shareholder return over the 47 years since inception is 14 per cent
• It invested S$49 billion and divested S$39 billion in the last financial year, both being record amounts
• Its portfolio remains anchored in Asia, with more than 60 per cent of assets in the region
• It continued to focus its investment strategy on four themes: Digitisation, sustainable living, the future of consumption and longer lifespans 

SINGAPORE — State investment firm Temasek Holdings reported on Tuesday (July 13) a portfolio value of S$381 billion for the financial year ending March 2021, a 24.5 per cent increase from the year before and a new record.

For the financial year ended March 2020, the firm had reported a decline in its portfolio value to S$306 billion, due to the Covid-19 pandemic, but the value of its investments rebounded over the past year in tandem with the recovery of financial markets.

With the latest financial results, Temasek’s net portfolio value has also surpassed its pre-Covid-19 level of S$313 billion in 2019. 

The 24.5 per cent one-year total shareholder return, which takes into account all dividends distributed to shareholders minus any capital injections, is much higher than the -2.3 per cent returns last financial year. 

The annualised total shareholder return over 47 years since Temasek's inception is 14 per cent. 

The state investor also said on Tuesday that it invested S$49 billion and divested S$39 billion in the last financial year. Both are record amounts for the firm. 

At a press conference announcing the financial results, Temasek executives stressed that the investment company manages its portfolio for long-term multi-year returns, while annual returns are volatile.

Mr Mukul Chawla, joint head of telecommunications, media and technology at Temasek, said: “We continue to look at that from a long-term perspective, with each individual investment being able to stand on its own merits.”

Over the last few years, Temasek has focused its investments on new opportunities arising from digitisation, sustainable living, the future of consumption and longer lifespans. 

It added that digitisation and sustainable living are long-term trends that have accelerated because of the Covid-19 pandemic. 

Financial services making up 24 per cent of its portfolio, and telecommunications, media and technology, making up 21 per cent, remained the largest sectors to be represented in Temasek's portfolio. 

However, digitalisation has led the state investor to evolve its financial services investments — where it previously invested mainly in banks, it now also invests in financial technology. 

Temasek added that it will continue investing in blockchain, artificial intelligence and climate change solutions.

As part of its strategy to invest in the future of consumption, Temasek has pumped money into digital entertainment and e-commerce firms such as Singapore’s Sea Group and China’s health beverage manufacturer Genki Forest.

As for the theme of longer lifespans, Temasek invested in German biotechnology firm BioNTech last year, which is focused on next-generation cancer treatment solutions. 

BioNTech is also well-known for its work in developing a Covid-19 vaccine with United States pharmaceutical company Pfizer.

"Looking ahead, we expect the global economy to recover steadily, encouraged by accommodative fiscal and monetary policy,” the firm said in a statement.

“However, the pace of recovery will likely be uneven across countries as some struggle with new peaks of infections and slow vaccination rates. Uncertainty remains around the virulence of new Covid-19 variants and the potential geopolitical reverberations as tensions mount between China and the United States.”

US-CHINA TRENDS

In terms of geographical exposure, Temasek’s portfolio remains anchored in Asia — more than 60 per cent of its portfolio’s underlying assets are in Asia. 

In the past financial year, its China assets as a proportion of its portfolio fell from 29 per cent in 2020 to 27 per cent in 2021. But in dollar terms, the company grew its China portfolio by S$14 billion in this financial year.

The Americas account for 20 per cent of Temasek’s portfolio in 2021, a 2 percentage point increase from 2020.

Singapore-based companies make up 24 per cent of its portfolio, which is unchanged from the previous year.

Mr Chawla said that for the last six years, the largest portion of Temasek’s incremental capital has gone to the Americas, which is in line with its goal of building a more resilient portfolio. 

Asked about China’s growing desire to regulate its domestic technology firms, he said that Temasek is optimistic about growth opportunities there. Regulation change is not unique to China and is one of the risks that Temasek factors into its investment decisions, he added.

Mr Nagi Hamiyeh, joint head of Temasek’s investment group, said in response to a question on geopolitical tensions between the US and China that Temasek’s investments in China have mostly been domestic rather than export-oriented.

This is consistent with Temasek’s investment trends in the future of consumption, longer lifespans and digitisation, which are domestic in nature.

“While we (will) keep monitoring the situation around the tension between the US and China, both the US and China are very important investment destinations for us and we will continue investing (in both countries),” Mr Hamiyeh said.

SUSTAINABILITY AS A CORE PRINCIPLE

Presenting a model that predicts the possibility of various outcomes, known as a “Monte Carlo simulation”, Temasek said that there is a five in six chance that the group’s probable total shareholder returns next year will fall between -16 per cent and 26 per cent.

This large range shows that there are a wide number of factors that could affect the following year’s outcomes, Mr Chawla said.

Mr Fock Wai Hoong, managing director of telecommunications, media and technology at Temasek, said the firm’s models show that a “high-ambition climate change” scenario — in which climate change and global warming are mitigated — gives Temasek its best long-term outcomes.

“(This scenario) delivers a better planet, healthier people and more sustainable prosperity. With this in mind, sustainability is very much at the core of all that we do,” Mr Fock said.

By 2050, Temasek aims to have a net zero carbon emissions across its portfolio. 

The company said that it wants to halve its 2010 carbon emission levels by 2030, by investing in climate-aligned opportunities, enable carbon negative solutions such as carbon capture technologies, and encourage decarbonisation efforts in its various businesses.

Ms Neo Gim Huay, Temasek’s managing director for climate change strategy, said that Singapore Airlines and energy solutions firm Sembcorp have also committed to achieve net zero emissions by 2050, for example.

"The good news is that it is no longer about the 'why', but about the 'how'. The specific transition pathways is a decision that each company's management and board will have to take," she added.

NEW TEMASEK LEADERSHIP

Mr Dilhan Pillay Sandrasegara, who will take over from Madam Ho Ching as the chief executive of Temasek Holdings from Oct 1, was not present during the press conference.

Asked whether the company’s direction will change once he takes over, the Temasek executives said that Mr Pillay plays an integral role in setting the group’s vision.

Mr Fock said that the senior management team is also critically involved in these efforts. 

“We are an evolutionary organisation, not a revolutionary organisation. So I think the changes that we make are progressive and well-positioned for the future.”

Mr Nagi said that Temasek’s board of directors takes succession planning seriously and is always identifying contenders internally and externally. 

“This is always ongoing, even now (with) Dilhan taking over on Oct 1. We are already planning for the next generation,” he said.