Don’t meddle with GIC, Temasek’s mandates

[SINGAPORE] Several questions were raised in Parliament last week about whether Singapore sovereign wealth fund GIC and investment company Temasek have been generating satisfactory risk-adjusted returns, and whether their contributions to the national Budget can be relied upon.

The last thing the government should do is to push these institutions to deliver higher investment returns. With elevated stock valuations and an uncertain outlook for global growth and inflation, this is probably the wrong time for long-term investors to embrace risk.

It might, however, be a good idea to encourage GIC and Temasek to provide more granular information about the performance of key segments of their portfolios. Given their long-term focus, the information does not necessarily have to relate to their most recent trades, but to key investment decisions that have contributed to, or detracted from, their performance over time.

This might help broaden awareness of their unique mandates and risk profiles, and help address the doubts and discontent that have been expressed about their performance.

In December last year, the Financial Times reported that GIC and Temasek’s returns over the past decade have trailed many of their global peers – including the New Zealand Superannuation Fund and the Canada Pension Plan Investment Board.

Senior Minister of State for Finance Jeffrey Siow said in Parliament last week that the government assesses GIC and Temasek’s performance against their respective mandates and risk profiles, rather than the performance of other funds.

What exactly are their mandates? GIC aims to preserve and enhance the international purchasing power of assets under its management. It maintains an overall risk boundary of a portfolio consisting of 65 per cent global equities and 35 per cent global bonds, though it invests in a broader range of asset classes.

For the 20-year period to Mar 31, 2025, GIC reported an annualised US dollar return of 5.7 per cent. After adjusting for global inflation, its annualised return for the period was 3.8 per cent.

On the other hand, Temasek is more of an active, bottom-up investor. As at Mar 31, 2025, its stakes in its listed and unlisted Singapore-based portfolio companies – such as DBS, Singtel, Keppel, Mapletree Investments and PSA International – accounted for 41 per cent of its net portfolio value of S$434 billion.

Temasek’s global direct investments – which include stakes in Dutch fintech Adyen, Indian hospital operator Manipal Health Enterprises and Chinese technology giant Tencent – accounted for a further 36 per cent of its portfolio. The remaining 23 per cent comprised its interests in various partnerships, funds and asset managers.

“Relative to GIC, Temasek therefore operates at the higher end of the risk spectrum,” Siow noted in Parliament last week. For the 20-year period to Mar 31, 2025, Temasek reported an annualised total shareholder return of 8 per cent in US dollar terms.

“Forgone returns”

Could GIC and Temasek have delivered better performance under their mandates?

Siow told Parliament last week that Temasek’s investment returns were affected in recent years by the performance of the Chinese market, though this was mitigated by higher returns from its growing investments in Europe and the US.

Meanwhile, GIC pre-emptively moderated its risk exposure amid heightened valuations, and in anticipation of increased market volatility. “These measures were intended to keep portfolio risks within acceptable limits and to guard against the possibility of significant asset impairment in the event of a sharp market correction,” Siow noted.

“But as equity markets have continued to remain elevated, these prudent de-risking measures resulted in some foregone returns,” he added.

Nevertheless, the government’s assessment is that the returns generated by GIC and Temasek are reasonable and within expectations, given their mandates and risk profiles, Siow said in Parliament.

“We will continue to review their mandates and performance regularly, in line with changes in the global economic investment landscape.”

Fostering trust, confidence

Tempting as it may be to address the questions about GIC and Temasek’s performance by pushing them to do better, meddling with their mandates at this stage of the market cycle could be risky.

The way I see it, GIC was not wrong to have adopted a more cautious stance. Even if currently lofty equity valuations do not crack, returns over the next few years will probably weaken.

Even the once “uninvestable” China market – which had been weighing on Temasek’s returns – has rallied in recent months on the back of strong global investor interest.

In short, this does not seem to be the right moment for GIC or Temasek to pursue higher returns by embracing more risk.

It might, however, be a good idea for these two stewards of Singapore’s national savings to hone their communication strategies, and foster a broader understanding of their investment activities.

To be sure, GIC and Temasek already provide extensive information about the management of their portfolios in their respective annual reports. Yet, it could be helpful if they supplemented this with case studies of specific investments that have added to their overall performance.

In April, Temasek will place the management of the three key segments of its portfolio – namely, its Singapore portfolio companies, its global direct investments, and its various funds, partnerships and asset managers – under three separate units.

The revamp could result in each of these three portfolio segments receiving more focused management attention, and pave the way for more granular reporting of the group’s performance.

In my view, this availability of detailed information could go a long way in helping to foster trust among its stakeholders.