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SINGAPORE: Finance Minister Tharman Shanmugaratnam has said any view of Temasek's track record as an investor should not be based on any individual transaction but on how it had performed over the years.
Speaking in Parliament on Thursday, he said Temasek had grown by a net S$56 billion over the course of the boom-and-bust market cycle that started in 2003.
Mr Tharman said that although the portfolio declined by S$58 billion in value between March and November last year, the fall came after a much greater gain in Temasek's investment portfolio of S$114 billion over the previous five years.
Temasek's recent sale of its entire stake in Bank of America has led to much speculation. No financial details were given, causing market observers to estimate the loss at billions of dollars.
And some Singapore lawmakers have asked the government for greater transparency.
The finance minister was quick to assure the House that Temasek's investment portfolio remains very much in the green.
Mr Tharman said: "Compared to any relevant market indices, or to other reputable institutional investors, Temasek has performed respectably.
"Temasek has achieved total shareholder returns by market value of slightly over 15 per cent per year on average, in US dollar terms, over the cycle. This compares with a 6 per cent annualised gain in global equity market indices."
But he acknowledged that between March and November last year, Temasek's investment portfolio shrank by S$58 billion.
And out of this, S$32 billion was due to a drop in market value of the 10 largest publicly-listed Temasek-linked companies in Singapore.
The share prices of these companies fell by about 41 per cent on average over the period, in line with the movement of the Singapore market as a whole. The Straits Times Index fell by 40 per cent between end-March to end-November 2008.
He argued that it was more meaningful to consider Temasek's investment portfolio as a whole, rather than to consider each investment in retrospect.
The minister added that Temasek's sale of Bank of America does not signal a shift in its investment orientation.
Temasek is still a long-term investor.
Mr Tharman said: "It generally goes into investments expecting to hold them for some time and this was indeed Temasek's intention when it invested in Merrill.
"But being a long-term investor does not mean being locked into every individual investment, regardless of major changes in the environment or a new investment proposition.
"Rather, Temasek regularly reassesses the risks and potential returns on its investments, and rebalances its holdings when it considers necessary to enhance the long-term value of its overall portfolio.
"This means that Temasek may divest an investment, even at a loss, to get a better mix of risks for its overall portfolio or to position itself to take advantage of opportunities elsewhere.
"Such rebalancing is a standard practice and discipline amongst long-term investors. The real difference is that the calculation behind any rebalancing of the portfolio is not aimed at short-term returns but the long-term value of the portfolio."
On whether Temasek could have timed its sale of Bank of America better, the minister said this was up to Temasek's board to decide.
Mr Tharman said: "These are matters for the board to decide. In retrospect, we will always be able to find investments which were sold too early and if it could have been sold in phases might have yielded more. For that matter, investments which may have been sold too late.
"So it will not be possible for us as government, and I'd really urge members (of the House) also not to try to be in the habit of looking at each investment in retrospect and see whether you could have made more of a gain or less of a loss.
"Let's look at the overall performance of the portfolio. I can assure though that Temasek, and for that matter GIC, do look at each individual loss very carefully and try to learn lessons from it.
"It is not possible to time the markets perfectly in these things and when you're having to make a major risk decision, you have to go about it in a highly disciplined fashion and not hope to time (the markets) week by week, day by day (for) every move."
In response to a question on whether there is a plan to review and to issue new guidelines for GIC and Temasek for future investments, the minister said a government structure for review is already in place.
Mr Tharman highlighted that government assets are managed through Temasek, the Government of Singapore Investment Corporation (GIC), and the Monetary Authority of Singapore (MAS).
The central bank remains on the conservative end of the spectrum, while the GIC has a diversified portfolio in global markets.
Temasek, which is at the other end of the spectrum, is largely an equity investor, with a higher risk appetite.
- CNA/ir
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