Temasek posts negative one-year return, portfolio value dips

TEMASEK Holdings on Tuesday reported that its one-year total shareholder return (TSR) had fallen into negative territory to -2.28 per cent for the 12 months ended March 31, 2020, in part due to the sharp market correction in the quarter up to March 31 in response to the onset of Covid-19.

This is a further drop from the previous fiscal year's one-year TSR, which had tumbled to 1.49 per cent. TSR is a compounded and annualised measure that includes dividends paid to its shareholder but excludes its shareholder's capital injections. Compounded over 46 years since its inception in 1974, annualised returns stood at 14 per cent.

The Singapore investment firm's net portfolio value dropped to S$306 billion, about 2.2 per cent below the year-ago S$313 billion on a Singapore-dollar conversion basis, it said in its annual report released on Tuesday. The latest net portfolio value is also slightly lower than fiscal 2018's S$308 billion.

Investments outpaced divestments during the year. Temasek invested about S$32 billion in assets and divested about S$26 billion in the same period. It ended the year with a "resilient balance sheet", said Temasek.

However, there remains growing concerns on the back of rising geopolitical and trade tensions caused by the US-China strategic rivalry and the impending US presidential election, said Michael Buchanan, head of macro strategy and head of portfolio strategy and risk group, in a media statement.

"These would likely create a more challenging environment for long-term investors and asset owners. Hence, we remain cautious and watchful around the risks surrounding the global economy," said Mr Buchanan.

Meanwhile, the outlook for China is positive over the medium term as recent data suggests that domestic economic recovery is underway and work has resumed steadily, said Temasek. The state investment firm expects overall policy to stay accommodative to support the economic and job recovery.

In Singapore, the economy has experienced a severe contraction, said Temasek. "Nonetheless, parts of the economy have shown resilience, and the ongoing fiscal support has helped to support employment and alleviate pressures on businesses."

Against this backdrop, its portfolio remained anchored in Asia with 66 per cent exposure in the region by underlying assets, with China and Singapore being the top two countries by concentration, at 29 per cent and 24 per cent respectively as at March 31, 2020.

Meanwhile, its exposure to the North American market stood at 17 per cent and that in Europe at 10 per cent.

Geographically, the US again accounted for the largest share of Temasek's new investments during the year, followed by China and Singapore.

Its exposure to financial services remained the largest, and stood at 23 per cent. Temasek said that it had increased exposure to the payments sector and other non-bank financial services companies such as PayPal, Mastercard and Visa, to benefit from the acceleration in digitisation of financial services.

Investment in technology, media and telecommunications and life science sectors also remained significant.

New technology investments included Duck Creek Technologies, a US-based software provider to the property and casualty insurance industry; ManoMano, a European home improvement product online marketplace; and MiningLamp, a Big Data solutions company in China.

Life sciences and healthcare investments, on the other hand, included AIER Eye Hospital; CareBridge, an integrated healthcare system; and biopharma companies developing new drugs and therapeutic solutions such as Beam Therapeutics, Coherus BioSciences, Transcenta and Vir Biotechnology.

Sustainability, on the other hand, continues to be a key area of focus for Temasek.

"As an owner, we want to own a resilient portfolio of companies which contributes to the progress of society. We will invest in negative emissions technologies and nature-based solutions. Meanwhile, climate risk analysis, including an internal carbon price, will guide decisions on our new investments in the decade ahead," said Temasek.

One key target is to halve its net portfolio carbon emissions by 2030 and in the long run, deliver a net zero emissions portfolio by 2050. Temasek closed the year with carbon neutrality.

Another area of focus is innovation, which includes building new capabilities in areas such as artificial intelligence blockchain and cybersecurity.

"These are new business opportunities which can provide our portfolio companies and ecosystem partners with a pool of talent and a suite of services," said Temasek.