How and why Temasek uses a hurdle rate

WE thank Kenneth Lim for his mention of Temasek's hurdle rate in the Hock Lock Siew column of your newspaper on July 15. It may interest your readers to know why and how we use a hurdle rate.

Temasek does not have a firm-wide hurdle rate or investment-return target. The hurdle rate we report in our Temasek Review every year is simply an average of the risk-adjusted hurdles for each of our investments, weighted by size.

We use a risk-adjusted cost of capital approach as one of our criteria to make our investment decisions and to track our performance on a bottom-up, or investment-by-investment, risk-aware basis.