Singapore’s state investment firm Temasek Holdings is counting on increased investments in unlisted businesses to counteract the ongoing US-China trade war and a global economic climate of uncertainty.
In its annual report released on Tuesday, Temasek said that unlisted assets, which include investments in third-party funds and privately held companies, accounted for 42 per cent of its portfolio as of March 31, up from 39 per cent a year ago.
“We continue to build our portfolio for the future by increasing our exposure in unlisted companies. Investments in this space have generally performed well and provided us with better returns than listed ones since 2002,” said Temasek International CEO Dilhan Pillay in a statement.
Temasek reported a net portfolio value of S$313 billion for the financial year ended March 31, 2019, up a measly 1.6 per cent from S$308 billion in 2018. This was the lowest increase in its net portfolio value over the last three years. The investment firm’s one-year shareholder return dropped to 1.49 per cent this year from 12 per cent in 2018.
Temasek said it had anticipated an increasingly challenging environment last July and had tempered its investment pace during the year, with divestments at S$28 billion outweighing investments (S$24 billion).
“We remain watchful around the risks of a late cycle recession in the US. Brexit and political fragmentation continue to weigh on Europe, while China has yet to move fully to restructure its economy for longer term sustainability,” said Temasek chairman Lim Boon Heng.
Its divestments during the year included biopharma firm Gilead Sciences, US-based Cargill Tropical Palm and Brazil-based paper producer Klabin.
Its investments included North American tech companies such as digital solutions provider UST Global and online food delivery marketplace DoorDash. In India, it invested in online ride-hailing company OlaCabs.
In terms of regional spread, Asia accounted for around 66 per cent of its portfolio, with Singapore and China taking a 26 per cent share each. The firm said it continues to grow its exposure to North America (15 per cent) and Europe (10 per cent) in line with “emerging trends and opportunities”.
During the year ended March 31, the US accounted for the largest share of its new investments, followed by Europe and China.
In a statement, Temasek chairman Lim said activity in Singapore is moderating, alongside slowing global growth.
“There may be further downside risks from the escalation of geopolitical tensions, though Singapore may benefit from increased trade and investment into the ASEAN region. We expect certain segments of the economy, including professional, financial and technology services, to remain resilient,” he said.
In terms of sectoral exposure, financial services continue to receive the largest allocation from Temasek at 25 per cent during the reported period, lower by one per cent from a year earlier.
Telecommunications, Media & Technology (TMT) accounted for 20 per cent of the firm’s total portfolio while Consumer & Real Estate, and Transportation & Industrials made up 17 per cent and 16 per cent, respectively.