Market indices are not ‘direct benchmarks’ for Temasek’s financial performance: Chee Hong Tat

SINGAPORE: Market indices do not serve as “direct benchmarks” to assess the financial performance of government investment firm Temasek Holdings, said Senior Minister of State for Finance Chee Hong Tat on Wednesday (Aug 2).

“Broadly speaking, Temasek has outperformed these market indices over the long term,” he told the House. 

“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.”

Mr Chee noted that Temasek began its investments with Singapore companies before expanding its portfolio to include firms in other parts of Asia and more recently, North America and Europe.

This means the state investor’s portfolio remains Asia-centric for now, with the region making up two-thirds of its exposure. On the other hand, the composition of market indices varies “significantly” from Temasek’s portfolio, Mr Chee added. 

Citing the MSCI World Index and MSCI All Country World Index (ACWI) as examples, he noted that these indices have larger weightages to the US stock market, which has done well over the past decade when 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,” he said.

Mr Chee was responding to parliamentary questions on Temasek’s latest annual results, and how they measure up to other market benchmarks and other sovereign wealth funds.

For the financial year ended Mar 31, Temasek’s net portfolio was valued at S$382 billion (US$287 billion), down 5.2 per cent or S$21 billion from the record S$403 billion it achieved a year ago.

Its one-year total shareholder return, which takes into account all dividends distributed to the shareholder minus any capital injections, turned negative to -5.07 per cent from the 5.81 per cent gain a year ago.

This performance for the past year can largely be attributed to a fall in equity valuations, both in the public and private markets, the state investor said in its latest annual review.

Temasek also registered its first net loss due to a change in accounting standards, as it had to take into account unrealised mark-to-market losses posted by companies in which it had less than a 20 per cent stake. 

On how Temasek fared versus other sovereign wealth funds, Mr Chee said it was “not straightforward” to make such comparisons because of different mandates, investment approaches and risk profiles of these funds.

Some, like Saudi Arabia’s public investment fund, do not report their performance on the same basis as Temasek, he said.

Mr Chee noted that given the challenging outlook ahead, Temasek has laid out its focus 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,” he said.

“The government will continue to hold Temasek accountable for delivering good long-term returns on the overall investment portfolio.”