Temasek has increased its exposure to payments and fintech players, in part, as a response to disruptions caused by the COVID-19 pandemic, the Singapore state-owned investment company said in its annual briefing on Tuesday.
Png Chin Yee, deputy chief financial officer and head of financial services, said exposure was actively increased to companies Temasek already liked, such as Visa, MasterCard, and PayPal amid market ructions earlier this year.
The increased exposure to the payments sector and other non-bank financial services companies would position Temasek to benefit from the acceleration in digitisation of financial services. It has also invested in “promising emerging companies” in the sector, including Blend, a US-based digital lending platform for mortgages and consumer banking.
Temasek reported a net portfolio value of S$306 billion ($214 billion), as of end-March, in line with preliminary figures reported in July, when it said its results would be delayed due to the pandemic. Total shareholder return for the year was negative 2.28 per cent in Singapore dollar terms, and negative 7.07 per cent in US dollar terms.
Financial services is the largest segment of Temasek’s portfolio, comprising 23 per cent of investments as on 31 March, although that was down from 25 per cent a year earlier and 26 per cent in the 2018 fiscal year.
In the ongoing fiscal year, too, Temasek continues to look at financial sector plays. In August, it announced the acquisition of a 3.9 per cent stake in BlackRock valued at around $3.5 billion, as part of PNC Financial Services Group’s move to sell a $14 billion stake.
Png said the acquisition of a stake in BlackRock fits well with Temasek’s thematics. “We believe that BlackRock is a high-quality company that will come out of the situation very well. It’s a market leader in ESG [environment, social and governance], it’s a market leader in technology, and sells its platform to other asset managers. And it’s a market leader in the asset management space,” she said.
When asked about Temasek’s stake in Ant Financial, which is planning an IPO, Png added the investment company liked what it was doing in China’s financial services space.
“They’re actually providing inclusive finance to a large swath of the population that previously may not have had access to credit, or asset management or insurance in the way that Ant is able to deliver,” Png said. “And they really use technology in a very meaningful way. melding that with data analytics, to actually provide a very cost-effective and efficient way of serving a large part of the population.”
In 2018, Temasek participated in Ant Financial’s $10 billion funding round, then valuing the company at around $150 billion. Ant Group’s planned dual listing in Hong Kong and Shanghai is expected to value the company at around $225 billion, Bloomberg reported in August, citing sources; that would make it the world’s largest-ever IPO, the report said.
Unlisted assets climb
The proportion of Temasek’s portfolio in unlisted assets jumped to 48 per cent at fiscal year end, up from 42 per cent a year earlier and 39 per cent in the 2018 fiscal year. That’s also up from 23 per cent in the 2010 fiscal year, Temasek said.
Png said the increase in proportion of private assets was partly due to the decline in relative valuation of listed holdings.
“Our private assets have, in the past, delivered stronger returns than our listed portfolio. They outperformed and have given us the illiquidity premium that we expect to derive from being invested in the private space,” she said.
“I think with the recovery in the market, you may see some retracement of that 48 per cent at this point in time,” she added.
Temasek had previously said it invests around four underlying themes: transforming economies, growing middle-income populations, deepening comparative advantages, and emerging champions. Those themes support six structural trends: longer lifespans, rising affluence, sustainable living, a more connected world, the sharing economy, and smarter systems.
Wu Yibing, joint head of the enterprise development group and the head of China, said the COVID-19 viral outbreak has accelerated some of the trends Temasek was already investing in, such as speeding the acceptance of food delivery apps in China.
When asked about reports of Temasek’s talks on investing in WeWork China — under the shared economy investment theme — Wu didn’t give a specific answer on progress on any deal.
Earlier this year, Reuters reported, citing sources, Temasek and Trustbridge Partners were holding talks over increasing their stake in the Chinese unit of the troubled WeWork co-working company. The mooted deal would give Temasek and Trustbridge majority control of WeWork China.
In 2018, Temasek and Trustbridge were among the leaders of WeWork China’s $500 million series B round.
WeWork had sent a shudder through private capital markets after its attempt at an IPO was scuttled in September last year as the sudden transparency of its operations revealed deep losses and corporate governance problems. That sent WeWork’s valuation tumbling from around $47 billion to below $8 billion, resulting in the ouster of its founder-CEO Adam Neumann.
“Co-working, as part of the sharing economy, we think the fundamental model still would work,” Wu said, although he noted the sector had been impacted by COVID-19.
“In terms of the overall commercial real estate, I think it’s going through a difficult time right now, but we believe in the sharing economy theme and its theme of increasing the efficiency of existing commercial property, which should prevail in the long run,” Wu said.
But he added, “We’ve been very cautious in this investment. And then with the existing investment, we’re already on looking through some restructuring so that we can actually take advantage of the current relatively high vacancy rate in terms of the commercial real estate, and then capture the efficiency gain that co-working has provided.”
The geographic exposure of the portfolio to China climbed to 29 per cent in the fiscal year, up from 26 per cent the previous year, while Singapore, where it formerly had the largest exposure, fell to 24 per cent from 26 per cent a year earlier.
In the press conference, Temasek attributed the geographic shift in part to better stock market performance in Greater China than in Singapore.
Yeoh Keat Chuan, senior managing director for the enterprise development group and deputy head for Singapore projects, pointed to the portfolio’s resilience amid the pandemic.
“This is mostly due to our limited exposure to the travel, hospitality and entertainment sectors,” Yeoh said at the press conference.
The main travel and hospitality related holdings in the portfolio are Singapore Airlines and the Mandai wildlife parks, which are owned by subsidiary Wildlife Reserves Singapore, Temasek said. Singapore Airlines was badly hit by the severe disruptions in the air travel sector this year; Temasek and other investors have provided the carrier with a funding package of around S$19 billion.