Temasek posts 9% portfolio gain, eyes Western assets

Temasek Holdings' portfolio value rose to S$215 billion ($169 billion), up 9% from S$198 billion in 2012, citing a global recovery as well as successful investments in energy and resources industries.

Over the year, the Singaporean sovereign wealth fund invested S$20 billion and divested S$13 billion, with S$4 billion allocated to the energy and resources sector. Its shareholder return was 8.86%.

Last year’s returns were down compared to its annualised returns to shareholders over the past decade however. Its ten-year annualised returns are 13%, and returns since inception in 1974 are 16%.

The fund’s returns are closely tied to equity markets, which have been very volatile over the past couple of years, notes Ho Ching, executive director and CEO of Temasek.

“We are almost entirely invested in equities," Ching says. "This means a lot more year-to-year volatility, as we have seen over the last ten years. We are prepared to ride through the large mark-to-market volatility on our portfolio value, because a portfolio of mostly equities also means we expect higher returns over the long term from our portfolio.”

The fund is mainly invested in Asia – Singapore and China remained the firm’s largest exposures geographically, at 30% and 23%, respectively. But its allocation to North America and Europe rose to 12% from 11% during the year, largely in the energy and resources sectors.

Indeed, Temasek sees increasing opportunities in the West – hence the plan to set up investment offices in London and New York. (A spokeswoman told AsianInvestor that executives have just started to look at potential office locations.)

Still, Temasek remains “anchored” in Asia, notes chairman S Dhanabalan. “While we increased our exposure in North America and Europe, Asia continued to attract the largest proportion of our investments,” says Dhanabalan. "We remain anchored in Asia and are optimistic about its long-term growth.” Despite healthy signs of a global recovery, he warns of tailwinds ahead.

“Last year, there were some signs of a recovery in the global economy. The severe disruptive risks from the global financial crisis subsided, but structural risks have not been completely resolved,” he says.

Temasek’s total Asian exposure remained steady at 71%, with over 73% of the portfolio held in liquid and listed assets. Exposure to Australia and New Zealand fell marginally to 13% from 14%, while Latin America allocations increased slightly to 2%.

Portfolio allocations remained broadly the same in FY 2013 as the year before. Financial services accounted for 31% of total exposure, followed by telecommunications, media and technology (24%); transportation and industrials (20%); life sciences, consumer and real estate (12%); and energy and resources (6%); and 7% in other.

In financials, Temasek increased its stakes in Industrial and Commercial Bank of China and insurers AIA and Ping An Insurance. It also holds shares in Bank of China, China Construction Bank and Standard Chartered.  

Investments in growth markets included PT Matahari Putra Prima, an operator of hypermarkets in Indonesia, and a stake in Halkbank, a Turkish bank with a leading market share in small and medium-sized enterprise banking.

The fund notes a S$4 billion investment in energy and resource companies, including Repsol, a Spanish oil company; Cheniere Energy, a US company building a liquefied natural gas export terminal; Venari Resources, a US oil company focused on deep water exploration in the Gulf of Mexico; Turquoise Hill Resources, a Canadian mining company; and Kunlun Energy, a Chinese natural gas transmission and midstream company.

Temasek also participated in the bond-cum-warrants rights issue of Olam International, a supply chain manager for agricultural products and food ingredients.