Temasek Holdings reported a record portfolio value for last year as rallying global stocks helped rake in positive returns, but the Singapore state investor also nearly halved its new investments reflecting a cautious approach to markets.
Temasek joined bigger state fund GIC and Chinese sovereign wealth fund China Investment Corp. in flagging intense competition from global funds for deals, which is pushing up valuations and threatening to drag down returns.
“Looking ahead, we remain cautiously positive on global growth. But we are also cognisant of risks in valuations, liquidity and politics,” Michael Buchanan, Temasek’s head of strategy, said at an annual news conference on Tuesday.
Temasek’s assets rose 14% to S$275 billion ($199 billion) in the year ended March, after falling 9% a year ago. Its long-held investments in financials, such as China Construction Bank, DBS Group and Standard Chartered, paid off last year as equity markets surged.
MSCI’s Asia shares ex-Japan index jumped about 15% last year. Temasek’s one-year total shareholder return swung to 13.4%, from a negative 9% the prior year.
However, given “the valuation consideration as well as perhaps more competition for transactions, we reduced our pace of investments quite a fair bit,” said Chia Song Hwee, joint head of Temasek’s investment group. Temasek invested S$16 billion in the year that just ended, versus S$30 billion in each of the past two years, and divested S$18 billion — resulting in a net divestment position for the first time since the year to March 2009.
Its investments are mostly in equities and it is the top investor in a third of companies in Singapore’s benchmark index. The city-state and China represent the largest share in Temasek’s portfolio by underlying exposure.
Under CEO Ho Ching, the wife of Singapore Prime Minister Lee Hsien Loong, Temasek has expanded to become a global investor. In the last few years, it has poured cash into sectors such as technology, life sciences and healthcare.