The press release states, “Temasek Holdings (Private) Limited (Temasek) today released its annual performance review, Temasek Review 2011 – Building for Tomorrow.
Covering the financial year ended 31 March 2011, Temasek Review 2011 reports a record year end portfolio value of S$193 billion, up from S$186 billion in the previous year.
Temasek continued its 2002 strategy of steady and active international investment, particularly in Asia, to reshape its portfolio for sustainable long term returns.
Mr S Dhanabalan, Chairman of Temasek Holdings, said, “While Asia rebounded swiftly in 2010, the USA and European economies continued to face uncertainties. Rising debt burdens, inflation risks, and political upheaval in the Middle East, tested the resilience of the global economic recovery. Against this backdrop, Temasek continued its steady investment and divestment pace, ending the year with a net cash position, in anticipation of opportunities ahead.”
For Temasek, investments made after 31 March 2002, when it began shifting its portfolio weight towards Asia, delivered annualised returns of 21% over the last nine years, or over 5.5 times returns for the period. The portfolio of earlier vintage investments made before 31 March 2002 , comprising mostly Singapore-based investments, delivered creditable annualised returns of 11% over the last nine years, or under 2.7 times.
From the shareholder perspective, Total Return to Temasek’s Shareholder (TSR) for the year was a modest 4.60%. This is based on the value of the overall portfolio, including cash and cash equivalents in the overall Temasek portfolio, as well as dividends to the shareholder and net of any capital injection from the shareholder.
Five-year and 10-year TSRs were steady at 7% and 9% respectively, while the 20-year and 30-year TSRs were 15% and 14% respectively. Since its inception in 1974, Temasek has delivered a healthy 17% compounded annual return.
Group net profit was S$13 billion, more than doubled from S$5 billion a year ago, due to higher contributions from Temasek investment activities and improved profits from its portfolio companies.
Investing for Sustainable Returns
Temasek remains anchored in Asia as part of its strategy to build its portfolio for resilience and sustainable long term risk adjusted returns.
During the year, Temasek maintained its steady pace of investments and divestments, with S$13 billion of investments and S$9 billion of divestments. It supported the recapitalisations of its portfolio companies, and stepped up its investments in the energy and resources sector, as well as in non-Asia growth economies such as Latin America. Temasek closed the year with net cash.
China remained Temasek’s largest investment destination. Additional investments included over S$3 billion in the rights issues of China Construction Bank and Bank of China.
In India, Temasek invested S$280 million in GMR Energy, giving it a significant exposure to the growing Indian power sector.
In Singapore, Temasek invested over S$100 million in Hutchison Port Holdings Trust, the first container port business trust listed on the Singapore Exchange.
Investments in the energy and resources sectors during the year included an initial S$500 million in Odebrecht Oil & Gas, a leading Brazilian upstream services provider for the oil industry, and S$700 million in Chesapeake Energy Corporation, the second-largest producer of natural gas in the USA.
In Mexico, in partnership with Impulsora Mexicana de Desarrollos Inmobiliarios, Temasek committed over S$100 million to pursue land banking opportunities with its first joint investment in Supra Terra.
Divestments during the year included Temasek’s stakes in Fraser and Neave, Hana Financial Group and Fortescue Metals Group.
Temasek ended the year with an underlying portfolio exposure of 77% to Asia, including 32% in Singapore. Latin America and other growth regions were a growing 3%, while mature economies of Australia & New Zealand and North America & Europe comprised a steady 20%.
The portfolio mix is balanced 45:55 between growth regions and mature economies.
Ms Ho Ching, Executive Director and CEO of Temasek explained, “We will continue to invest in the transforming economies of Asia and Latin America. At the same time, we remain open and ready to participate in opportunities in mature markets such as our recent investments in the USA.”
The annual Temasek Review, Temasek Bonds and credit ratings are public markers of Temasek’s credit quality. They are also an integral part of the Temasek commitment to anchor Temasek’s institutional framework for financial discipline over the long term, foster good governance, and expand its stakeholder base.
Starting with its maiden 10-year Temasek Bond in 2005, Temasek has issued additional Temasek Bonds over the last two years to build out its debt maturity curve, including a groundbreaking 40-year Singapore Dollar Temasek Bond in late 2010. To date, Temasek has issued S$10 billion of triple-A rated Temasek Bonds in Singapore dollars, US dollars and British pounds sterling, with an average debt maturity of 16 years.
In February 2011, Temasek established a US$5 billion Euro-commercial Paper (ECP) Programme to cover the short end of its debt maturity curve. The Temasek ECP Programme has been assigned the highest short term ratings of A-1+ by S&P and P-1 by Moody’s.
Both the Temasek Bond and ECP Programmes form the major building blocks in its financing framework.
Contributing to the Community
As a responsible corporate citizen, Temasek is committed to the wider communities through its philanthropic support and endowment gifts for building people, as well as building the capacity and capability of communities around Asia, and rebuilding lives.
Temasek launched two philanthropic foundations in August 2010, following strong returns in excess of its risk-adjusted hurdles in the previous financial year that ended 31 March 2009, The Temasek Education Foundation supports educational causes in Singapore, while the Temasek International Foundation promotes and advances international scholarship and fellowship in the broader global community.
Temasek remains optimistic on the longer term outlook in Asia and other growth economies, despite medium term inflationary and structural risks, compounded by global imbalances.
Mr S Dhanabalan explained, “According to a recent McKinsey Global Institute report, mid-sized cities in growing markets are projected to deliver almost 40% of global growth by 2025. We continue to see the rising middle income populations driving rapid urbanisation and housing demands. Innovation will spur demand for new services, which could also lead to attractive investment opportunities.”
Temasek’s four investment themes of transforming economies; growing middle income populations; deepening comparative advantages; and emerging champions; will continue to guide its investments in the decade ahead as it strives to deliver sustainable long term value to its shareholder.
Ms Ho Ching elaborated, “Our strategy is to continue to invest and divest at a steady pace; stay liquid; shape a resilient portfolio and yet maintain the full flexibility to shift our portfolio mix, if and when necessary. Institutionally, we are committed to do things today for the long term. We are here to build a better tomorrow for our future generations. Directionally, we would like to further expand our stakeholder base to include co-investors and retail investors over time.””
Read more: Temasek Holdings
In December 2016, Crown Prince Maha Vajiralongkorn became King of Thailand, succeeding his father King Bhumibol Adulyadej who passed away in October 2016. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]
by Michael Maduell
In my frequent and vast interactions with chief executives of small-to-large asset management firms, I’ve witnessed a number of traits that successful firms – meaning growing and retaining assets under management plus getting real respect in the industry – are able to properly execute. Besides generating amazing returns and matching the right solutions for the asset owner clients, CEOs need to be advancing their firms. Of course, quality client service should remain front of mind for fund management firms. In this short piece, I will focus on three traits that successful fund managers tend to possess.
1. Abundant Charisma from Founders
What is memorable and what will stick in one’s mind? A cadre of asset managers possess charismatic chief executives. BlackRock’s Larry Fink, DoubleLine’s Gundlach and Rajiv Jain of GQG Partners are some prime examples that come to mind. DoubleLine is a relatively new player compared to BlackRock and already amassed over US$ 100 billion in assets. Being a founder of the fund management company also helps, as CEO hires (often bringing a book-of-business contacts) may tend to look elsewhere unless generously compensated.
Having an effective cheerleader CEO is essential in nurturing and growing a sustainable franchise in a monochromatic industry of imitators. Too often, CEOs of some asset management firms are pure “salespeople” – too pushy or fake, or a highly-bright number-cruncher with low or nil emotional intelligence.
2. Not Drinking Too Much of One’s Own Kool-Aid
“We are a data-driven, technology, ESG-focused, smart-beta, solutions-led provider of services.” Hey, 2018 did I get that right?
Yes, your stuff does not stink. Like a broken clock, many CEOs rely on the flavor of the year or grappling a playbook, beating the idea over the heads of pensions and sovereign fund clients and prospects. In the long-run – meaning maintaining assets over a lengthy period of time – I find it’s better to be more objective when discussing potential strategies. I’m talking about a healthy dose of informative marketing. However, being overly-transparent or even talking yourself out of the strategy is not what I am directly advocating. It is important to be realistic about the strategy or thematic idea, as the attractiveness of these concepts shift over time.
3. Stirring up Controversy – Strategically
Shaking the tree and stirring the pot – this trait can surely backfire if not properly executed. Being the brightest crayon in the box can work. Even virtue signaling – latching onto a social current – can work in some instances, but CEOs that can deliver impactful counter-culture statements that shock the conscience tend to draw attention – and capital. This might not be the best example; however, upon the ascendancy of Abraaj Group, the firm’s founder, Arif Naqvi, often commented to not describe countries like China, India, etc. as emerging markets but as global growth markets – then creating a comparison to Wall Street and its risks. Abraaj was able to raise a ton of capital, before its downfall stemming from early 2018.
Boards need to diligently examine the CEOs they select. Does the firm want to grow or hold the line for the planned dividend? My belief is that if you are not growing, you are decaying, as the world moves faster and faster.
The views in this article are expressed by Michael Maduell.
Michael Maduell is President of SWFI.
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