Where does Temasek focus its investments?

Excerpt: longer lifespans, growing wealth, sustainable practices, intelligent systems, sharing economies, and an increasingly interconnected world

On 10 July 2018, Temasek, Singapore’s sovereign investment holding company, released its annual report for fiscal year 2017/18.

Established in 1974, Temasek initially portfolio was highly representative of Singapore’s industrialisation efforts. Singapore Airlines, Singapore Telecom, and Singapore Development Bank formed the core of its investments. In 2002 Temasek expanded to cover emerging Asia, and in 2011 it began investing globally.

According to the report, Temasek’s net holdings stands at S$308 billion (US$235 billion). Its compounded annualised return is 15% over its 44 year history, and the dividend income in this fiscal year reached S$9 billion (US$ 6.6 billion).

A breakdown of its portfolio

As of March 31, 2018, assets in Singapore and China accounted for 27% and 26% of Temasek’s portfolio, respectively. The United States ranked third, comprising 13%, closely followed by Europe, responsible for 9%.

By industry sectors, the Financial Services industry remains the largest industry sector for its investments, standing at 26% of the total investment portfolio, up from 25% in the previous fiscal year. Singapore Telecom remains the largest single investment in Temasek, accounting for 9% of the portfolio.

Temasek’s outlook for the future

Following the same investment philosophy over the past 16 years, Temasek makes investments based on four overarching themes: transforming economies, growing middle income populations, deepening comparative advantages, and emerging champions.

The report indicates that future investment strategies will be based on six major trends: longer lifespans, growing wealth, sustainable practices, intelligent systems, sharing economies, and an increasingly interconnected world.

The global situation

Overall, Temasek views the global economy with optimism. However, there exists political risks, and in the later stages of expansion medium-term risks may further hinder global economic growth. This includes trade conflicts, an escalation of geopolitical tensions, and, in some major economies, monetary policy and financial pressures.

Temasek expects the global economy to grow moderately this year, remaining optimistic about the medium-term trend of the Chinese economy. It anticipates the continued promotion of economic growth by policymakers, and a move towards sustainable economic growth. As for the US, Temasek expects the federal government to continue tightening its policies. After this year, its expansionary fiscal policy may result in a recession for the US. Furthermore, Europe is expected to continue to experience booming economic growth, improved employment and higher inflation.

Companies Temasek has invested in this past year

For this most recent fiscal year, Temasek’s investment portfolio is primarily composed of:

Technological companies with significant competitive advantages

This includes Global Healthcare Exchange, the healthcare business and data automation company specialising in  a cloud-based supply chain technology exchange platform for healthcare service providers, equipment manufacturers, distributors, and suppliers; Tencent, one of China’s leading companies specialising in online social, entertainment and gaming platforms; BluJay, a supply chain logistics software provider; Intapp, a professional services platform; ams AG, a leading designer and manufacturer of sensor solutions; and Internet Brands, a lifestyle website operator.

Financial services, focussing on non-bank financial services, especially payment companies

This includes global payment networks Visa and Mastercard; Adyen, a global payment company offering B2B payment solutions; and Worldpay, which provides secure payment services for businesses in-store, via the Internet, or through mobile phones.

Biotechnology

This includes Tessa Therapeutics, a Singaporean corporation which harnesses the power of biotechnology to develop cancer cell therapies; and Pear Therapeutics, which specialises in prescription digital therapeutics, and develops software for the treatment of mental illness and other diseases.

Finally, in addition to increasing its stake in Tencent, Temasek has invested in Midea Group, China’s largest consumer appliances company, and WuXi NextCODE, which seeks to improve global health using sequence data, through the provision of services pertaining to the generation, organisation, mining, sharing and application of genomic data.

It also participated in the Series C funding round for Ant Financial, a Chinese financial technology company.

Source: Temasek Annual Report 2018

This article was originally written in Chinese by Zhao Ya Ting for the Momentum Works WeChat channel but translated into English for The Low Down. The original can be read here.