Published May 29, 2009

Temasek's 6-year report card shows $56b gain

This is in spite of last year's setback that wiped out half the gains of 5 preceding years in just 8 months

By TEH SHI NING

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(SINGAPORE) Temasek Holdings's portfolio grew $56 billion since March 2003 - as its $58 billion loss last year came after 'a much greater gain' of $114 billion in the five preceding years.

Related article: Click here for Mr Tharman's speech

Providing these figures in Parliament yesterday, Finance Minister Tharman Shanmugaratnam said that Temasek has 'performed respectably', and that 'the only reasonable way' to evaluate its performance was to see 'how the losses and gains add up, and how its overall portfolio performs over time'.

Responding to MPs' questions on Temasek's recent loss-making divestment of Bank of America (BoA) shares, Mr Tharman also said that its early exit does not detract from its position as a long-term investor.

Temasek's investment in Merrill Lynch since December 2007 was converted into BoA shares when Merrill was bought over by BOA in January this year. News then broke last Tuesday that Temasek had sold all of its 3.8 per cent stake in the US bank - at an estimated loss of around US$3 billion.

A week later, Temasek issued a statement explaining that their 'investment thesis had changed from Merrill's specific businesses to the more diversified BoA linkage to the broader US economy' and that 'the risk-return environment had changed substantially', hence, the divestment. Reiterating Temasek's rationale yesterday, Mr Tharman said that a long-term investment orientation 'does not mean being locked into every individual investment, regardless of major changes in the environment or a new investment proposition'.

He acknowledged the premise behind MPs' comments this week - that 'Temasek has been on a losing path, and Singapore is poorer for it'. But he disagreed, saying, 'This is simply not the case.'

'Temasek has in fact made large investment gains over the course of the market cycle that began in 2003, including the boom that lasted till 2007 as well as the subsequent bust,' he said.

Mr Tharman also pointed out that a 'large part' of the $58 billion, 31 per cent of Temasek's portfolio value, lost from end March to November last year, was due to declining values of its local investments. Thirty-two billion dollars was lost due to the drop in market value of the 10 largest listed Temasek-linked companies here. Share prices of these TLCs fell 41 per cent on average over the period, in line with the movement of the Singapore market as a whole, Mr Tharman said.

Temasek's financial accounts for the year ended end-March 2009 have not been audited yet, but Mr Tharman said that its position as of last November already 'takes in all unrealised losses including the mark-to-market losses on the Merrill investment'.

'What matters however is not how Temasek did in this last year, when the markets were in collapse, but how it has done over the cycle as a whole.'

And over the six-year cycle, Temasek out-performed relevant market indices, Mr Tharman said, comparing its annualised shareholder returns of 15 per cent in US dollar terms to the MSCI World Index's 6 per cent annualised gain.

Its returns were higher than that of a weighted index of global, Asian and Singapore equity market indices, as well what 'several other well-regarded investors have earned over the cycle', Mr Tharman added.

But, it is 'not realistic to expect it to outperform every cycle', nor is it realistic to expect it to 'avoid losses on every individual investment or losses on its overall portfolio when the markets go through sharp correction,' he said.

Mr Tharman assured MP Inderjit Singh, that the three agencies holding and investing the government's assets - Temasek, GIC and MAS - are 'not being left to run on autopilot'. While the government will not be 'peering over each and every investment decision' he said, it does survey government assets as a whole, to ensure that there is no undue concentration of risks.

In reply to a question from Non-Constituency MP Sylvia Lim, Mr Tharman said that while he is not aware of whether Temasek voted for or against BoA's acquisition of Merrill at the shareholders' meeting last December, he does not think the vote is indicative of whether they intended to hold on to BoA shares.

Ms Lim also asked why the sell-off of Temasek's stake had not been staggered, a move which could have tempered losses. To which Mr Tharman repeated that it was better to consider the overall performance of the portfolio long-term, instead of looking, in retrospect, at timing profits from a single deal.