SINGAPORE: Temasek, one of the leading sovereign wealth funds, reported a 5% loss in total shareholder return (TSR) for its last financial year. However, this decline can be attributed to the challenging market conditions that other funds are also facing. In an interview with The Straits Times, Temasek’s executive director and chief executive, Dilhan Pillay Sandrasegara, explained the firm’s conservative valuation methodology, which values unlisted investments at book value less impairment. He mentioned that if these investments were to be marked to market, there would be an S$18 billion (RM62 billion) value uplift.
Despite the loss, Temasek’s portfolio stands at S$382 billion (RM1.3 trillion), with TSR at 8% over three years and 9% over a 20-year period, including the 2008 global financial crisis. Dilhan noted that the investment climate has become more complex over the past year, with tighter liquidity conditions, higher inflation, and challenges on the geopolitical front.
Investors must grapple with the risk of decoupling, the emergence of protectionist policies, and the high costs of energy security and transition. Dilhan emphasized that these factors could lead to lower global growth and lower real returns. However, he also highlighted that there are still opportunities, particularly in India, where he sees long-term potential and emerging opportunities comparable to China in 2005.
Temasek has been a long-term investor in both China and India since the early 2000s. The growing middle-income population in India, coupled with widespread digitization and changes in consumption patterns, are driving opportunities for growth in the consumer, digital, and healthcare sectors.
Regarding recent regulatory developments in China, Dilhan stated that they have provided greater clarity for the market and tech companies. He believes that with a more supportive environment and continuous domestic innovation, there is potential for further growth of the digital economy and the emergence of the next generation of leading tech companies.
In South-East Asia, Temasek sees attractive investment opportunities driven by strong economic fundamentals, favorable demographics, and secular tailwinds. The company’s top sustainability goals include halving net carbon emissions compared to 2010 levels and achieving net-zero carbon emissions by 2050 for its investments and portfolio companies. These commitments have been recognized with Temasek ranking at the top of the governance, sustainability, and resilience scoreboard published by the Global Sovereign Wealth Fund.
Temasek is taking a more refined bottom-up approach to investing, focusing on digitalization, sustainable living, future consumption, and longer lifespans. Investments in these areas accounted for 31% of Temasek’s portfolio at the end of March 2023, compared to 13% in 2016.
Furthermore, Dilhan highlighted the increasing importance of trends such as sustainable living and longer lifespans in developed markets. The rapid aging of populations and low replacement rates create significant investment opportunities.
Fintech and artificial intelligence (AI) are also of key interest to Temasek. The advancement of technology in banking and the promise it holds for new players make these areas crucial for portfolio relevance. While Temasek is not ready to invest directly in AI applications, it remains plugged into opportunities through enablers such as semiconductor players. Temasek’s focus in AI is more on capability building in line with its T2030 Temasek Operating System strategy.
Temasek sees value in the private credit market, particularly in an elevated interest rate environment. Returns in the private credit market have outperformed equity investments, offering a better risk-reward profile.
In an ever-changing investment climate marked by volatility, complexity, uncertainty, and ambiguity, Temasek’s biggest challenge is to remain relevant. The executives at Temasek understand the need to adapt to new realities in order to stay competitive and continue making a positive impact on society.
“We must constantly change. This is not a very comfortable thing to do, whether for individuals or institutions. But if you do not change, you become irrelevant,” said Dilhan and Chia Song Hwee, deputy CEO at Temasek International.
– The Straits Times/ANN
Credit: The Star : Business Feed
