Singapore state-owned investment firm Temasek Holdings has reported a net portfolio value of $382 billion for the FY2023 ended March 31, 5.2% lower than its previous net portfolio value of $403 billion in the year before.
The group reported a loss of $7.3 billion, down from last year’s net profit of $10.6 billion. According to the group, this was attributable to changes in accounting standards, which includes mark-to-market (MTM) gains and losses. After adjusting for MTM, the group would’ve reported a profit of $14.7 billion. Under the new accounting standards that were introduced in 2018, this is the first time the group reported a loss, noted chief financial officer Png Chin Yee.
Temasek’s one-year total shareholder return (TSR) was -5.07%, while its TSR since its inception in 1974 remained at 14%, unchanged from last year.
The group’s 20-year and 10-year TSRs for this FY stood at 9% and 6% respectively.
Investments and geographical breakdown
Over FY2023, Temasek invested $31 billion and divested $27 billion, resulting in a net investment of $4 billion. According to the group, its investment pace was slowed due to its “cautious approach amidst global uncertainties”. Deal activity also slowed down globally as liquidity tightened.
See also: Trump wins Republican nomination, setting up rematch with Biden
As at March 31, Temasek’s portfolio remains anchored in Asia with a total of 63%. In terms of geography, Singapore, China and the Americas remained the group’s three largest markets by underlying exposure with 28%, 22% and 21% respectively.
“We continued to invest into opportunities that are aligned with long-term structural trends, and engaged our large Singapore portfolio companies to seek out opportunities of the future. We also reduced certain positions in the rebalancing of our portfolio, including where we see long term structural risks, in ensuring that we continue to maintain the strength of our balance sheet in the pursuit of a resilient and forward-looking portfolio,” says the group in its July 11 statement.
Over the decade, the group has invested a total of $326 billion and divested $248 billion. As at March 31, the group’s underlying exposure to developed economies, including Singapore, North America, Europe, and Australia & New Zealand was 64%, compared to 58% in 2013.
The group has also announced plans to open a new office in Paris in a bid to expand its global footprint in places where they see “the opportunity to allocate significant capital for growth”.
Sectoral breakdown
In terms of sectors, transportation and industrials made up the majority of Temasek’s portfolio at 23%, one percentage point higher y-o-y.
Financial services, which stood on top in the year before, fell to second place at 21%, down two percentage points y-o-y.
Telecommunications, media and technology rounded up the top three sectors at 17% in FY2023, down one percentage point y-o-y.
During a briefing to the media, Png noted that the group has been growing its focus sectors – consumer, media & technology, life sciences & agri-food and financial services (non-bank) since 2011. In 2011, the group’s focus sectors stood at $193 billion or 5% of its portfolio compared to 2023’s $382 billion or 32% of its portfolio.
Since 2011, the group’s focus sectors outperformed its overall portfolio by four percentage points, Png adds.
For more stories about where money flows, click here for Capital Section
Temasek’s unlisted assets also outperformed its listed assets with an internal rate of return (IRR) of 14.4% over a 20-year period. This is compared to the IRR of 8.0% for its listed assets and 10.1% for its overall assets over the same period.
Early stage investments, which are capped at 6% of Temasek’s portfolio, have also outperformed the group’s overall portfolio with a seven-year IRR of 10.9% versus its overall portfolio’s IRR of 7.8%.
As at March 31, the group’s ended the year with net cash. Of its portfolio, liquid and sub-20% listed assets stood at 27% while unlisted assets made up 53% of its portfolio.
FTX
On FTX, chief investment officer Rohit Sipahimalani said that the decision to invest into the crypto firm was one that the group was “disappointed” in, but pointed out that it was part of their early stage investing portfolio and that the risks involved were mitigated by the group keeping it to less than 6% of its overall portfolio.
That said, he stressed that the group had conducted its due diligence and that FTX had seemed like a company that had good tech with checks showing that they're compliant with regulations.
Temasek had made the decision to write down over US$200 million ($268.3 million) that was invested into FTX in November 2022. The group subsequently announced that they had cut the pay of those who were responsible for the investment in FTX in May due to the "reputational hit", says Sipahimalani.
Outlook
Looking ahead, the group highlighted its focus on three growth engines, which are investment, partnership and development.
The investment engine comprises 86% of the group’s portfolio, of which 40% are made up of its Singapore portfolio companies such as Seatrium, Singapore Airlines C6L (SIA) and Olam Group. The remain VC2 ing 46% are made up of global direct investments.
The partnership engine makes up 10% of Temasek’s portfolio which consists of assets under management (AUM) businesses with about $79 billion of AUM. These businesses provide products like private equity, private credit, public market investing, and capital solutions.
Finally, the development engine, which makes up about 4% of Temasek’s portfolio, will focus on investing in cutting edge innovations in areas such as sustainable energy solutions, quantum computing and deep tech; as well as building enterprises for the future in areas such as life sciences, data solutions and cybersecurity.
“As we navigate an increasingly complex world, there are significant key challenges in the future. For the first time in decades, sticky inflation and tighter monetary conditions are manifesting themselves in significantly higher interest rates, says Dilhan Pillay, executive director and CEO of Temasek Holdings.
“The investment climate has become much more complex than what we have encountered since the Global Financial Crisis (GFC) – the confluence of rising geopolitical tensions, the risk of decoupling amidst a rethinking of globalisation, the emergence of potentially restrictive, nationalistic and protectionistic policies amidst the proliferation of foreign investment regimes and the costs associated with energy security and energy transition portend lower global growth and lower real returns, and are challenging issues that investors will have to grapple with,” he adds. “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.”
