Temasek Delivers 20-Year Annualised Returns of 8%: What Investors Should Know

Singapore stocks buy

Tim Phillips

July 19, 2022

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Temasek is well-known as being a separately, and professionally, run investment company that’s wholly-owned by the Singapore government.

Last week, the investment manager released its Temasek Review 2022 report that covered the 12 months ending 31 March 2022.

It’s always an interesting look at one of the most consistent and sustainable investment managers operating today.

While the headlines in Singapore will be focusing on Temasek’s 5.8% one-year total shareholder return (TSR), as a long-term investor I’m much more interested in its long-term track record.

Here, Temasek is undoubtedly a success. Over the past 20 years, it has delivered an annualised 8% TSR.

So, for investors managing our own stocks (or ETFs), what can we learn from Temasek’s approach and how has their latest year looked? Let’s find out.

Temasek well-diversified with a long time horizon

One of the first things that investors will take away is that the net value of Temasek’s portfolio reached a record high of S$286.5 billion during the period.

That was around S$22 billion higher than where its portfolio stood a year ago. Additionally, Temasek is extremely well-diversified from a portfolio perspective.

Whether it’s viewed through a geographical or sector lens, the investment manager has balanced exposure with the biggest sector weighting belonging to Financials (see below).

Temasek 2022 sectors

Source: Temasek Review 2022 presentation

Lim Boon Hen, Chairman of Temasek Holdings, did acknowledge the difficulties faced by investors today:

“Our world today is immensely complex. The challenges faced by government, businesses and society have never been so multi-dimensional or far-reaching.”

However, that didn’t stop Temasek investing S$61 billion in its latest financial year – a record high over the past decade.

In another sign of the times, it was interesting to see how unlisted assets continues to make up a significant chunk of Temasek’s portfolio.

Understanding the power of compounding

If anything, Temasek is a great example of continuing to invest through good times and bad. In fact, since its inception (in 1974), Temasek has delivered an incredible 14% annualised TSR (see below).

As investors can see, though, that number has been achieved despite multiple crises, such as the Asian Financial Crisis, the Dotcom Bubble, and the Global Financial Crisis – to name just a few.

Temasek inception returns

Source: Temasek investor presentation 2022

Overall, it’s important that investors remember the power of compounding when investing.

Even though we find ourselves in very trying times – with high inflation, rising rates and the possibility of stagflation – investors with time horizons longer than five years should continue to find ways to invest.

Staying level-headed amid volatility

What marks out long-term-oriented institutional investors, such as Temasek, is that they continue to focus on a strategy despite all the “noise”.

Similarly, investors like you and me should have an investment plan that is suited to us and we should maintain our approach to ensure we can reach our financial goals.

Despite stock markets in 2022 giving investors a bad case of heartburn, Temasek’s approach highlights the benefits of continuing to invest through the ups and downs.

About the Author: Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth. He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer. In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.