Persistent inflation, escalating geopolitical tensions, decoupling risks and the costs associated with the energy transition are pressing concerns for all investors. But in an era marked by rapid changes and unforeseeable obstacles, Temasek remains unwavering in its commitment to sustainable, long-term growth.

To deal with this uncertainty, Temasek’s portfolio comprises broadly of two broad categories of investments. The first is a resilient component that can provide stable and sustainable returns, or liquidity in the form of dividend income or distributions from funds. The second is a dynamic component that is made up of shorter-term investments in growth equities, which allows it to recycle capital for higher returns.

This approach equips the company with a resilient and diversified portfolio capable of withstanding external pressures and thriving through market fluctuations – all while enabling a focus on sustainable growth over the long term.

At the heart of Temasek’s portfolio strategy are its three growth engines that bolster resilience in its investments against this volatile global backdrop. This strategy allows the company to adopt a long-term perspective on its investments, collaborate with partners to scale greater impact, and identify future capabilities that can generate added business value.

INVESTMENT ENGINE: DELIVERING SUSTAINABLE RETURNS OVER THE LONG TERM

Accounting for about 86 per cent of its portfolio, Temasek’s investment engine consists of 46 per cent global direct investments, including stakes in investment firm BlackRock, international health and beauty retailer A.S. Watson, and medical device manufacturer ThermoFisher; and 40 per cent in Singapore-based portfolio companies that have delivered sustainable returns, such as DBS, CapitaLand, Sembcorp, SP Group and Mapletree Investments.

Its global direct investments include growth equity in businesses with the potential to become globally competitive market leaders, early-stage ventures that represent less than 6 per cent of the overall portfolio, as well as private credit and funds. “Having a small portion of our portfolio allocated to early-stage investments helps Temasek keep abreast of emerging technology and business models, and identify potential winners early,” said Mr Rohit Sipahimalani, Temasek’s chief investment officer.

“Temasek is a patient and long-term investor. This mandate allows us to build resilience in our portfolio because we can weather short-term market volatility,” he added. “We manage our liquidity and balance sheet for investment flexibility and resilience. Driven by our views of trends shaping societies, we continually shape our portfolio in line with structural trends – the future of consumption, sustainable living, digitisation, and longer lifespans – as we focus on achieving sustainable returns over the long term.”

PARTNERSHIP ENGINE: SCALING CAPITAL THROUGH PARTNERSHIPS

Temasek’s partnership engine makes up 10 per cent of its portfolio and serves to scale capital in areas with the potential for stable and sustainable returns over the long term through collaborations with third parties. While some platforms are wholly owned by Temasek, others are joint ventures with like-minded organisations.

A notable partnership includes Temasek’s alliance with global asset manager BlackRock. Together, they formed Decarbonization Partners, which aims to invest in opportunities in the tech-based decarbonisation space – all while seeking long-term, sustainable financial returns. Apart from BlackRock and Temasek’s expertise, Decarbonization Partners also brings together scientists, technologists and thought leaders to advance climate-centric solutions.

Another example is Temasek’s partnership with global impact investment group LeapFrog Investments. The strategic partnership is in the form of a multi-fund investment by Temasek to anchor LeapFrog’s future funds. Temasek has also taken a minority stake in LeapFrog to provide growth capital to support the expansion of the LeapFrog team and investment capabilities across Asia and Africa. Through such endeavours, the partnership engine not only diversifies Temasek’s investment portfolio, but also contributes to meaningful progress in Singapore and the rest of the world.

DEVELOPMENT ENGINE: IDENTIFYING AND BUILDING TOMORROW’S BUSINESSES

With a keen eye on the future, the development engine, which forms 4 per cent of Temasek’s portfolio, invests in deep tech and innovative technologies that could disrupt existing businesses or offer exponential growth potential in the future. It also identifies and builds new businesses to enable innovation and growth in Temasek’s longer-term portfolio. Central to this mission are investments led by its enterprise development group; the suite of specialised, next-generation capabilities known as the Temasek Operating System; and a dedicated team focused on emerging technologies, which span areas ranging from advanced computing to sustainable energy solutions.

To build up deep-tech capabilities, Temasek committed to invest S$1 billion a year into deep-tech innovation across a range of domains. These include advanced manufacturing, disruptive materials, net-zero tech, life sciences and food tech.

In a recent initiative, Temasek inked a memorandum of understanding with Nanyang Technological University and the National University of Singapore to embark on a S$75 million pilot programme. The programme aims to accelerate the creation of successful deep-tech start-ups emerging from the research activities at these universities.

Temasek will invest S$65 million through Xora Innovation – an early-stage deep-tech investing platform of Temasek – in the deep-tech start-ups, while NTU and NUS will each invest S$5 million in this effort.

The two universities will also develop a shared intellectual property (IP) licensing framework, which will speed up the translation of university technologies into spin-off enterprises. This will reduce the licensing process to one month, a significant improvement from the previous five-month duration. “The streamlined approach is expected to enhance companies’ competitiveness through schemes such as deferred payment of licensing fees,” said Mr Sipahimalani. “This can ease the burden of upfront costs – allowing firms to allocate more resources towards commercialising the IP and generating new revenue streams.”