[SINGAPORE] Temasek Holdings rode a rally in global equities with a focus on developed markets that probably helped the Singapore state-owned investor's assets reach a record.
Assets at the firm, which releases results this week, may have increased 16 per cent to 18 per cent to as much as S$263 billion in the year to March 31, according to estimates by Institutional Investor's Sovereign Wealth Center and CMC Markets. That would be the biggest jump in assets in five years and surpass last year's all-time high of S$223 billion.
"They had a great year for their equity investments," said Nicholas Teo, a Singapore-based strategist at CMC Markets who has been following Temasek's annual results over the last 10 years. "It shows how aggressive their investment style is compared to other state investors." Temasek chief executive officer Ho Ching, who has been on a sabbatical since April, oversaw more investments in mature markets, taking advantage of recovering economic growth in the US and Europe. The Standard & Poor's 500 Index added 10 per cent and the Stoxx Europe 600 Index jumped 19 per cent in the year to the end of March, bolstering Temasek's foreign assets.
Holdings in Singaporean companies and stakes in Alibaba Group Holding and Virtu Financial may have helped the company's portfolio increase as much as S$40 billion, which would be the biggest jump since 2010, when it climbed S$56 billion, according to its website.
Temasek is the biggest shareholder in about a third of the 30 members in the Straits Times Index, including Singapore Telecommunications, of which it owns 51 per cent, and DBS Group Holdings with 28 percent. The index gained 8.1 per cent in the year to March 31.
Temasek completed 54 deals last fiscal year, up from 47 in the 2013-2014 period, according to data compiled by the Sovereign Wealth Center.
Unlike GIC, Singapore's sovereign wealth fund, Temasek almost exclusively invests in equities and has few restrictions on how much it can hold. Norway's sovereign wealth fund, the world's biggest, isn't allowed to own more than 10 per cent of any of its portfolio companies and seeks to have no more than 60 per cent of its portfolio in equities.
Temasek had 70 per cent of its portfolio in listed assets as of March 2014, according to its website. Founded in 1974, it originally owned shares in former state-owned companies and began directly investing in foreign equities in 2002.
As transactions in developed markets tend to be larger, Temasek has opted to co-invest with other firms, said Enrico Soddu, an analyst at the London-based Sovereign Wealth Center.
"Temasek's expertise is mainly in emerging markets," said Mr Soddu. "As they have been looking for more non-listed firms in developed markets, they have been teaming up more with other investment firms and tapping their expertise." Among Temasek's biggest transactions was an investment in ING Groep NV's NN insurance business, together with private- equity firm RRJ Capital. Temasek and its unit Seatown Holdings International in April 2014 agreed to inject 525 million euros, out of a total of 1.28 billion euros.
Temasek was among investors that committed US$1.3 billion in Dallas-based oil exploration company Venari Resources LLC.
Temasek also completed major transactions announced during the previous 12 months, including the acquisition of a 25 per cent stake in Hong Kong-based Hutchison Whampoa's retail arm A.S. Watson & Co for HK$44 billion (S$7.66 billion).
Among Temasek's biggest divestments was the sale of Hong Kong-listed shares of China Construction Bank Corp, leaving it with 14.4 billion shares as the second-biggest holder, according to data compiled by Bloomberg.
Weighing on its portfolio was Standard Chartered, whose shares tumbled 13 per cent in the year to the end of March as the British lender came under pressure to reverse a decline in earnings. Temasek is the biggest shareholder with a 17 per cent stake. The shares rose 9.4 per cent this year after the bank appointed a new chief executive officer.
Geographically, the state investor had 31 per cent of its assets in Singapore as of March 2014, 41 per cent in other parts of Asia and 24 per cent in North America, Europe, Australia and New Zealand.
Total shareholder return, which includes dividends, has averaged 16 per cent in Singapore dollar terms through March 2014 since the firm's inception, according to its website.
Among other companies with holdings in various industries, shares in Warren Buffett's Berkshire Hathaway Inc increased 16 per cent in the year to March 31.
China Investment Corp, the nation's US$740 billion sovereign wealth fund, said on Friday that returns on its overseas investments fell for a second year in 2014 because of a strong dollar and weak commodity prices.
The recent gains may prompt Temasek to reduce some of its biggest positions, CMC Markets' Mr Teo said.
"Temasek has enjoyed a bull run over the past year," he said. "I expect them to become a bit more defensive in their portfolio."