Temasek Holdings' Investment Performance

31 Ms Foo Mee Har asked the Deputy Prime Minister and Minister for Finance whether the Government has data on (i) how Temasek Holdings’ total shareholder returns compare to other market benchmarks over the years (ii) how its portfolio of assets has shifted and is positioned for the future and (iii) how its portfolio of unlisted assets has performed and contributed to its overall performance to date.

32 Ms Mariam Jaafar asked the Deputy Prime Minister and Minister for Finance in light of the drop in Temasek's 10-year Total Shareholder Returns to 6%, how does Temasek's long-term returns vary across the portfolio and how does each segment compare to benchmarks such as the MSCI World Index and Private Equity index.

33 Mr Saktiandi Supaat asked the Deputy Prime Minister and Minister for Finance (a) what are the main reasons for Temasek Holdings’ worst reported returns since 2016, where the net value of its portfolio shrunk by $21 billion from 2022 to 2023; and (b) how do Temasek Holdings’ recent results compare against other sovereign wealth funds such as Saudi Arabia’s Public Investment Fund.

The Senior Minister of State for Finance (Mr Chee Hong Tat) (for the Deputy Prime Minister and Minister for Finance): Mr Speaker, may I have your permission to take Question Nos 31 to 33 together?

Mr Speaker: Yes, please.

Mr Chee Hong Tat: Thank you. Sir, Temasek publishes its portfolio's performance relative to various market indices like the MSCI All Country World Index (ACWI) over different horizons. The data requested by Members are generally available on Temasek's website and annual reports.

Broadly speaking, Temasek has outperformed these market indices over the long term. But it is important to recognise that Temasek is not a portfolio fund manager and the MSCI indices are not direct benchmarks for Temasek's performance.

As a bottom-up investor, Temasek invests directly in companies. Temasek started with the Singapore companies it owned and subsequently expanded to take stakes in companies in Asia. Temasek has only recently invested more actively in North America and Europe. Therefore, its portfolio for now is still Asia-centric, with about two-thirds exposure in Asia.

On the other hand, the composition of indices varies significantly from Temasek's portfolio. For instance, MSCI World Index and ACWI have larger weightages to the US stock market, which has done very well over the last 10 years compared to Asian stock markets. This is why there will be occasions when Temasek's returns are higher than the MSCI World Index and ACWI, and other occasions when the returns are not as high as these indices.

As for returns on Temasek's unlisted assets, these have registered an Internal Rate of Return (IRR) of 14.4% in the past 20 years, compared to 8% for its listed assets. Over the last decade, Temasek's unlisted portfolio has also generated IRR of over 10% per annum, higher than its listed portfolio.

On comparisons with other sovereign wealth funds, we have previously explained that it is not straightforward to make such comparisons because the funds have different mandates, investment approaches and risk profiles. There are also funds, like Saudi Arabia's Public Investment Fund, that do not report their performance on the same basis as Temasek.

With regard to Temasek's performance for the latest Financial Year ending 31 March 2023, this was largely driven by mark-to-market losses as global investments saw a reversal of gains from the high valuations in the last two years.

To position its portfolio for the future, Temasek has stated that it is focused on building a resilient portfolio that can withstand exogenous shocks while capturing growth opportunities. As shareholder, the Government's role is to ensure that Temasek has a competent board to oversee its management and ensure that its mandate is met. The Government will continue to hold Temasek accountable for delivering good long-term returns on the overall investment portfolio.

Mr Speaker: Ms Foo Mee Har.

Ms Foo Mee Har (West Coast): Thank you, Speaker. I have two supplementary questions for the Senior Minister of State. The first one is about Temasek's unlisted assets, comprising 53% of the portfolio as at 31 March 2023. Temasek had shared – and I think, the Senior Minister of State has also touched on that – if the unlisted portfolio was marked to market, it would provide $18 billion of value uplift.

So, my question is, given the dominance of unlisted assets in its portfolio, what are the plans for Temasek to reflect the underlying value of this portfolio in reporting shareholder returns going forward; and also, the impact of this unlisted assets' performance in its contributions to its Net Investment Returns Contribution (NIRC) for Singapore's Budget?

Mr Chee Hong Tat: Mr Speaker, Temasek's valuation methodology for its unlisted assets is defined on its website and specifically, the unlisted assets are valued at book value less any impairments that are required to be taken and it only recognises any value uplift for these investments upon listing or sale.

Ms Foo also asked about the impact on NIRC. Sir, NIRC is calculated based on the overall expected long-term returns of our investment entities and not the actual year-on-year returns. What this means is that the annual fluctuations to our entities' returns do not directly impact the NIRC at all.

Mr Speaker: Mr Saktiandi Supaat.

Mr Saktiandi Supaat (Bishan-Toa Payoh): Thank you, Mr Speaker. I have two supplementary questions for Senior Minister of State Chee.

The first is with regards to the losses mentioned in my Parliamentary Question. I mentioned that the net value of the portfolio shrunk by $21 billion. I think the Senior Minister of State mentioned it somewhat just now, but can he reassure the House that Temasek's losses or gains in terms of threshold of returns historically, will there be ways where the Senior Minister of State can highlight that, given the worst-case scenario going forward, what thresholds should we be comfortable with in term of dollars in million or billion amounts every year?

The second question I have is, the Senior Minister of State mentioned just now that the focus on Asia is about two-thirds, if I am not mistaken. Can the Senior Minister of State share, given the investment climate, Temasek's assessment or the Ministry of Finance's (MOF) assessment going forward? To what extent will be Temasek's investment domestically versus overseas going forward, given circumstances if things require domestic investments, that is, investments needed in Singapore?

Mr Chee Hong Tat: Mr Speaker, I think the portfolio and the investment decisions are what we will leave to the board and the management of Temasek to decide on independently. As I mentioned in my reply, what the Government will do is to look at the overall portfolio returns for Temasek over the longer term.

Sir, Mr Saktiandi also asked about whether there will be certain thresholds. Sir, I think we have to bear in mind that we should look at the returns over a longer time period and on a portfolio basis. I think the board will set certain benchmarks to measure the performance of management. As the Government, we will certainly hold Temasek accountable for the overall long-term returns.

Mr Speaker: Ms Mariam Jaafar.

Ms Mariam Jaafar (Sembawang): I thank the Senior Minister of State. Can I just clarify if the unlisted investments here would be comparable to private equity investments, which I think have had long-term returns north of 12% to 15%? So, if you are saying 10% for Temasek, is this the right comparison?

My second supplementary question is, could you also share the returns by geography, in particular, Singapore, China and then something that is more comparable to the MSCI?

Mr Chee Hong Tat: Mr Speaker, unlisted assets cover a diverse range of asset classes. They include private equity, but they also include infrastructure and real estate.

I think Ms Mariam asked about the benchmarks and comparisons. I shared in my main reply, and let me just refer to that again, that if we look at the rate of return, the IRR, for Temasek's unlisted assets, these have registered an IRR of 14.4% in the past 20 years. If you look at it, the unlisted portfolio has also generated an IRR of over 10% per annum over the last decade.

The comparisons are not one-to-one with some of the other fund managers that Ms Mariam may be referring to. I do not have the data in front of me right now, but as I had also explained, Temasek is not a portfolio fund manager.

Mr Speaker: Mr Leong Mun Wai.

Mr Leong Mun Wai (Non-Constituency Member): Thank you, Speaker. Can I ask the Senior Minister of State one clarification? I am confused because Temasek reported a loss of $7.3 billion and you said the portfolio shrunk by $21 billion. How do you reconcile the two figures? If the portfolio shrunk by $21 billion, then rightfully, that should be reported as a loss as well.

Mr Chee Hong Tat: Sir, I think Temasek has explained its position clearly in its report. I refer the Member to those reports.

Mr Speaker: Mr Leong Mun Wai.

Mr Leong Mun Wai: Speaker, can I ask the Senior Minister of State again? Sorry, I did not get that explanation in Temasek's report. Can you please explain again?

Mr Chee Hong Tat: Mr Speaker, I will invite Mr Leong to have a look at what Temasek has put out previously in its annual report. The numbers that he referred to, the numbers that he wanted to clarify, I believe these are already explained by Temasek in their annual report.