Singapore Temasek assets grow to $185b
$21b added despite tough year and plunge in Merrill stake
By Grace Ng
TEMASEK Holdings’s assets grew 13 per cent to $185 billion in its latest financial year, despite a turbulent period for equity markets.
The growth comes amid a freefall in the market value of troubled Western banks like Merrill Lynch, of which the Singapore sovereign wealth fund (SWF) is the largest shareholder.
Chairman S. Dhanabalan noted that Temasek knew it was likely to lose money in the short term when it invested in Merill a few months ago. But the investment is sound over a horizon of five to seven years, he said.
Temasek is also prepared to invest more money in Western banks if opportunities arise, he told 180 executives at an event organised by TiE Singapore, a network of entrepreneurs.
Temasek, which is solely owned by the Ministry of Finance Incorporated, has added $21 billion to the market value of its net portfolio over the year to end March.
It delivered 17 per cent total returns on shareholder funds over the period, sustaining its compound annual growth rate of 17 per cent since its inception in 1974.
‘Temasek’s 13 per cent growth in assets is very strong given the tough market conditions,’ said Mr Adrian Gmuer, Asia business head of hedge fund house RMF.
Mr Gmuer noted that the HFRI Emerging Markets Global Index rose 11 per cent in the year to March 31. This tracks the performance of hedge funds that, like Temasek, are exposed to growth markets in Asia, Latin America and elsewhere.
Mr Dhanabalan also revealed that Singapore and Asia account for nearly 75 per cent of Temasek’s investments.
He disclosed these figures ahead of the release of Temasek’s annual review next Tuesday - its fifth since 2004.
The review will be closely watched by Singaporeans and global investors, as it will be the first time Temasek will report on its performance amid a credit crisis touted to be the worst since the Great Depression in the 1930s.
But Mr Dhanabalan said Temasek has weathered rough times before: ‘We have been around for more than three decades, we have seen the ups and downs of several economic cycles.
‘Every time I go through a cycle…it’s like the end of the world. I asked myself, in 1973 during the oil shock, what will the world look like five years from now?
‘Looking back now, it was just a little blip,’ he said, adding that he hoped the current problems would not be ‘too severe a downturn’.
The credit crunch allowed Temasek to take a significant stake in major institutions like Merrill Lynch at ‘attractive prices’, which would not have been possible ‘under normal circumstances’, he noted.
‘We also knew that likely the (share) price may go below what we had invested at,’ he said. Merrill’s share price has fallen 55 per cent since last Dec 24, when it first announced Temasek’s investment.
‘But we are looking at it for five to seven years,’ he said, adding that the investment will boost the value of Temasek’s portfolio in the ‘long term’.
It will take another year or two to be certain whether Merrill Lynch will pull through the crisis, noted Mr Hugh Young, managing director of Aberdeen Asset Management Singapore.
‘But a five- to seven-year horizon is ample time for Merrill to rebuild itself, and Temasek can wait since it is a long-term investor,’ he said.
Mr Dhanabalan noted that there is ‘fear and suspicion’ about SWFs, as they are perceived by some to lack governance and may make politically-motivated investments in key foreign companies.
He asserted that Temasek is differentiated from other SWFs in terms of its ownership, accountability and transparency.
Temasek is ‘neither a part of the Government’s policy arm nor do we invest Singapore’s foreign reserves’, he said.
Instead, it operates as ‘an autonomous and professional’ owner and manager of its assets and investments.
Temasek also follows the regulations that apply to any company in Singapore, he added. The country’s Constitution ensures fiscal discipline in how the national wealth held by Temasek is used.
Thirdly Temasek is ‘arguably one of the most transparent privately owned companies around’. It is recognised by US policy makers as setting ‘the gold standard in transparency’ together with Norway’s SWF, said Mr Dhanabalan.
Source : Straits Times - 22 Aug 2008
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