Temasek's investment portfolio sees significant losses with negative shareholder return

Temasek’s investment portfolio has taken a hit following high inflation, geopolitical risks and slow economic growth resulting in it recording a negative one-year return of -5.07% for its shareholders.

This was a drop from a plus 5.81% a year earlier, as high interest rates eroded the value of global direct investments, particularly those in technology, healthcare and payments, it said.

Don't miss: Temasek named in class action lawsuit allegedly 'aiding and abetting' FTX fraud

According to the company, its Singapore portfolio companies remained resilient in spite of the drawdowns faced by the global market. The global direct investments, however, saw a reversal of gains from the high valuations in the last two years, particularly in the technology, healthcare, and payments space, as valuations de-rated in the higher interest rate environment, as stated by the company. 

Temasek’s chief financial officer, Png Chin Yee, said that despite the challenging environment, Temasek’s portfolio has remained resilient as it reshaped its portfolio over the past decade to achieve sustainable returns over the long term. 

“We have diversified beyond Singapore and Asia, into Europe and the Americas. Guided by our four structural trends digitisation, sustainable living, future of consumption, and longer lifespans, we remain focused on identifying and capturing growth opportunities in these areas globally,” she added.

The investment company stated in its annual review that the value of its net portfolio dropped to SG$382 billion in the financial year, from a record SG$403 billion in the previous year.

Temasek pointed to persistent inflation in spite of multiple rate hikes by central banks to be one of the reasons behind the negative results. 

Additionally, “intensifying geopolitical tensions on several fronts such as US-China tensions and the Russia-Ukraine war, alongside rising nationalism and protectionism, have led to a marked shift from globalisation that has been the mainstay of global growth for the past 20 years. The confluence of these events, not seen in decades, has raised the cost of capital and weighed on capital flows. It also had an impact on the pace of energy transition, in the face of greater demand for energy security and resilience,” it said. 

Temasek chairman, Lim Boon Heng noted that 2022 was the most challenging year for markets over the past decade, with high interest rates, lower growth and a highly polarised geopolitical environment. To combat the global market turndown, Temasek opted to further raise its exposure to unlisted assets to 53% up from 52% in financial year 2022. 

It said its unlisted portfolio is well diversified across geographies and sectors, and has grown steadily over the years, due to its investments in attractive opportunities in private markets and the increase in the value of those unlisted assets. 

As Temasek moves forward, Dilhan Pillay, executive director and chief executive officer of Temasek Holdings said that there are significant key challenges in the future. “In this era of volatility and uncertainty, we must anticipate not just the road ahead, but also what lies around the corner. To this end, in 2019, Temasek developed our T2030 strategy – a 10-year roadmap to guide our strategic planning, capability building, and institutional development initiatives. It guides us towards achieving our objective of sustainable value over the long term, in line with our purpose,” he said. 

Temasek’s T2030 strategy consists of four pillars – constructing a resilient and forward-looking portfolio that can withstand exogenous shocks and perform through market cycles, embedding sustainability from the way we invest, to how the institution operates, and developing the organisation and team with the right structure and capabilities to tackle the challenges that may pop up in the future, all in the pursuit of delivering sustainable value over the long term.

The news comes after Temasek said that it will be cutting the compensation of its senior management and investment teams who were involved in its failed investment in cryptocurrency company FTX as it takes responsibility for the "negative impact on [its] reputation, according to a statement by chairman Lim Boon Heng.  

In his statement, Lim noted that an independent team conducted an internal review of the investment and that the findings were directly presented to the board risk and sustainability committee and to Temasek's board. 

"Although there was no misconduct by the investment team in reaching their investment recommendation, the investment team and senior management, who are ultimately responsible for investment decisions made, took collective accountability and had their compensation reduced," Lim said. 

Related articles:
Temasek to cut compensation of senior leaders as it takes responsibility for failed FTX investment
Temasek named in class action lawsuit allegedly 'aiding and abetting' FTX fraud
FTX loss not just financial loss but reputational damage to Temasek, says DPM Lawrence Wong