Singapore’s Temasek Holdings saw its portfolio hit a record high of S$403 billion ($297 billion) in the year to 31 March, as the sovereign fund re-established the Lion City as its biggest single-country investment location and cut back on its China commitments, according to its annual performance review held on Tuesday.
The state sovereign wealth fund, which fully owns Singapore property giants Mapletree Investments and CapitaLand Group, said 63 percent of its investment portfolio is in Asia – mainly due to increased investments in its home country with 27 percent of its assets located in the city-state this past year, compared to 24 percent a year earlier. At the same time the share of its portfolio located in China dropped by five percentage points to 22 percent.
Ranked as the eighth largest sovereign wealth fund in the world, Temasek also signalled a slowdown in investment activity this financial year due to growing fears of a recession in developed countries where 65 percent of its investments are allocated.
“We will prudently manage the risks and opportunities arising from macroeconomic and market events,” said Rohit Sipahimalani, Temasek’s chief investment officer. “Taking into account the reasonable likelihood of a recession in developed markets over the next year, we maintain a cautious investment stance while staying focused on constructing a resilient portfolio underpinned by the structural trends we have identified.”
America As Third Top Investment Location
Temasek’s net portfolio valuation as of 31 March was up 5.8 percent from the S$381 billion it reported a year earlier, after the organisation invested an all-time high of S$61 billion, against S$37 billion worth of divestments in the 12 month period.
Portfolio growth slowed markedly over the past year, however, falling from the 25 percent surge seen in the 2020-2021 financial year, which followed a 2.2 percent dip in portfolio value recorded in the year ending March 2020.
During the most recent period, the sovereign fund brought its commitments to its home country as a portion of its total investments back up to pre-pandemic levels with Singapore deals having accounted for 26 to 27 percent of its total investments in 2018-2019.
At the same time, Temasek slowed its activity in mainland China, with Asia’s largest economy accounting for just 22 percent of its investments in the year ending 31 March 2022. In 2020-2021 China had captured 27 percent of Temasek’s commitments with that portion at 29 percent two years ago. Prior to the pandemic, mainland China accounted for 26 percent of Temasek’s total portfolio.
Sipahimalani said the reduced activity in China was mainly due to market price movements in the mainland as the state investor continued to pick up “attractive opportunities even in this volatile environment.”
Looking ahead, Temasek foresees gloomy global economic prospects including its top two investment locations where it is projecting slower-than-expected expansion for Singapore’s highly export-oriented economy, as well as “weak” growth for China.
Beyond its top two jurisdictions, Temasek upped the share of its assets in the US by a single percentage point to 21 percent, and increased its exposure to other Asian nations by a similar degree to 14 percent. The organisation kept its holdings in Europe, the Middle East and Africa steady at 12 percent of its portfolio, while Australia and New Zealand continued to represent 4 percent of its holdings.
Property Now 15% of Portfolio
By sector, property and consumer assets accounted for 15 percent of Temasek’s portfolio at the end of March, with its property business mainly managed through Mapletree and CapitaLand – which it now fully owns as a result of privatisation of CapitaLand’s development business last year.
This proportion was slightly higher than the 14 percent share in property and consumer holdings for the year ending March 2021, but is still below the 17 percent portfolio allocation in the financial years ending 2020 and 2019.
“Our exposure to the various sectors may vary from year to year, as we invest in opportunities that are aligned with our views of structural trends,” a spokesperson from the group said. “As part of usual portfolio rebalancing we do from time to time, we may increase or decrease our stakes in investments based on our intrinsic value tests.”
The spokesperson, however, declined to provide an outlook or targets for Temasek’s real estate business.
Financial services continued to account for the largest slice of Temasek’s portfolio at 23 percent, followed by transportation and telecommunications at 22 percent and 18 percent, respectively. In the transport sector, Temasek is the largest shareholder in Singapore Airlines and it also controls telecom giant SingTel.
Aside from owning two Singapore property giants, Temasek also maintains a 100 percent stake in infrastructure consulting firm Surbana Jurong, while serving as the largest shareholder in local conglomerate Keppel Corp and Cuscaden Peak – a consortium formed by CapitaLand and Mapletree alongside hotel tycoon Ong Beng Seng.
Keppel Corp, which controls Keppel Land and is the sponsor of Keppel REIT, last year went head to head with Cuscaden Peak in a takeover battle for the real estate business of Singapore Press Holdings. Cuscaden Peak in March won SPH’s real estate portfolio with its superior offer of S$3.9 billion.
After doubling its net portfolio value over the past decade, Temasek Holdings’ leadership vowed to maintain a “cautious” stance in the year ahead amid a gloomy global economic outlook.
“Against these global uncertainties, our investment approach remains cautious,” said Lim Ming Pey, managing director of Temasek International’s strategy office, during a media briefing. “Generally speaking, in view of the current environment, we expect to slow down our investment pace this financial year.”
Temasek’s Singapore dollar total shareholder return (TSR) – which is used to measure portfolio performance – slowed to 6 percent for the year through March, from 25 percent in the previous 12 months. The wealth fund’s 10-year and 20-year TSRs were both unchanged at 7 percent and 8 percent, respectively and Temasek has an average TSR of 14 percent TSR since its inception in 1974.
Sipahimalani declined to provide any hard targets for Temasek’s portfolio value but maintained that the organisation is aiming to increase its returns to surpass the 7 percent 10-year TSR.