Returns generated by GIC, Temasek ‘reasonable and within expectations’: Jeffrey Siow

[SINGAPORE] The returns generated by Singapore’s sovereign wealth fund GIC and state-owned investment company Temasek are “reasonable and within expectations” given their respective mandates and risk profiles, said Senior Minister of State for Finance Jeffrey Siow.

Speaking in Parliament on Monday (Jan 12), he noted that GIC has achieved a real return of 3.8 per cent per annum over the past 20 years, while Temasek has reported a total shareholder return of 8 per cent per annum in US dollar terms over the last 20-year period.

“We will continue to review their mandates and performance regularly in line with changes in the global economic investment landscape,” he added. “Our focus has always been on long-term performance rather than on short-term or year-to-year fluctuations.”

Siow said that Temasek operates mainly as a “bottom-up investor”, putting money directly in companies in the geographies and domains where it has “built deeper capabilities and where it sees long-term growth potential”.

While Temasek’s performance in recent years has been affected by the performance of the Chinese market, this was mitigated by higher returns from its growing investments in Europe and the US, he said.

“Ultimately, the government holds the board of Temasek accountable for delivering good long-term returns on its overall portfolio. That is on the basis of net portfolio performance, after deducting all investment fees and expenses,” he said.

On the other hand, Siow said GIC’s mandate is to preserve the international purchasing power of the assets under its management.

He pointed out that GIC had “some foregone returns” in recent years, as it took pre-emptive measures to moderate its risk exposure in anticipation of increased market volatility and heightened valuations.

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 said.

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“Any assessment of returns must therefore be considered alongside the risks that are taken,” he said.

Questions raised by Singapore lawmakers on Monday about the performance of GIC and Temasek comes after a Financial Times article in December said recent returns by both entities “compared unfavourably” with many global peers, including sovereign wealth and pension funds.

“It is not always appropriate or meaningful to directly compare Temasek’s performance with other funds; it really depends on the mandate and the risk profile that Temasek was set up to do,” Siow said.

“Nonetheless, as a comparison, I think Temasek’s performance has indeed been commensurate with other sovereign wealth funds with a higher risk profile, such as the Canadian Pension Plan Investment Board,” he added.

In addition, Siow said the government expects Temasek to “exercise appropriate oversight” over its investments, as a holder of portfolio companies with major Singapore-based assets.

“The investment approach... is to develop and build a diversified portfolio that reduces volatility and outperforms a broad-based market index,” he said. “The government will continue to engage them to do it.”