Singapore state investment fund Temasek Holdings on Thursday said its total shareholder return (TSR in Singapore dollars) had fallen to negative 9.02% on a one-year basis, primarily on account of the price declines of its listed investments.
This marks the first time in seven years that Temasek has reported a net decline in its net portfolio value.
The state fund also warned that the future may be bumpy, and added that it saw an “environment of generally lower returns in the years ahead”.
This warning comes even as Temasek’s portfolio value fell to S$242 billion as of March 31 this year – in comparison, its assets had risen to a record S$266 billion for the corresponding period last year. The portfolio is down S$24 billion year-on-year.
The Temasek Group’s net profit for this period was S$8 billion, compared to S$14.5 billion for the year-ended March 2015, the state fund’ review report added.
“Global market conditions are more challenging – markets especially in Asia have been volatile. There is uncertainty about economic and political fundamentals. There is increased uncertainty, partly reflecting the ongoing hangover from the excesses that help cause the global financial crisis. This suggests an environment of lower returns in the years ahead,” said Michael Buchanan, head strategy, senior managing director, portfolio strategy and risk group, Temasek.
The investment firm had about 54% of its assets in Singapore and China as of March-end 2016, and this appears to have played a key part in the negative TSR, as these two markets had seen a major rout during the last fiscal. China’s CSI 300 Index has crashed 21 percent, and the city-state’s Straits Times Index was down 18%, during the twelve months ended March 2016.
“Our TSR was a negative 30% in 2009, only to rebound to 43% the following year. As a long-term investor, we believe that a longer-term – 10 and 20 year TSR – are a more accurate reflection of our performance. From 2003 to 2016, our returns for this period were 11%. About 66% of our listed portfolio are on the Straits Times Index and Hang Seng China Enterprises Index (HSCEI) – both these posted negative returns last year. Our one year TSR was far more resilient than these indexes.” said PNG Chin Yee, head financial services, senior managing director, China, Temasek.
Last year, Singapore’s sovereign wealth fund GIC too had warned that it could be hit by lower returns for as long as a decade. Going a step further, GIC in annual report in 2015 had added that it may have to tolerate short-term unrealised losses, before reaping the benefits of its long-term investments.
Read DEALSTREETASIA’s coverage of GIC’s 2015 report [here].
According to Temasek International’s executive director and CEO Lee Theng Kiat, the fund had continued to be an active investor during this period, investing S$30 billion, even as it divested S$28 billion of its portfolio.
“We saw the liquidity-driven market rally earlier in the year, and took the opportunity to step up our divestment pace, relative to the past years. The record divestment reflected in part our plan to reshape our portfolio, in line with what we saw were the longer term trends, such as in the financial, life sciences or digital space,” Theng Kiat added.
The US had accounted for the largest share of Temasek’s new investments during the year, followed by China. Major investments during the year-ended March 2016, included US$450 million in Univar, a US-based distributor of commodity and sociality chemicals, and other firms in that Americas such as Alexion and Regeneron.
Leading investments in China included Zhongce Rubber, Cainiao, even as it increased its stake in Industrial and Commercial Bank of China, as well as investments in Postal Savings Bank of China.