Temasek Holdings, an investment company owned by Singapore's government, reported a modest 1.49% gain in total shareholder returns in local currency for the latest fiscal year ended March 31, lifting the value of its global portfolio to a record S$313 billion ($231 billion).
On a U.S. dollar basis, the portfolio lost 1.93%, reflecting the U.S. currency's more than 3% appreciation vis-a-vis the Singapore dollar over the year.
At a briefing Tuesday, Temasek executives said the latest fiscal year was one that saw its investment team actively repositioning its portfolio for increasingly challenging market conditions.
"Global growth has weakened since the middle of 2018 (and) we expect this to continue," Png Chin Yee, Temasek's senior managing director, portfolio strategy & risk group, as well as head, financial services, told reporters.
With trade tensions already disrupting supply chains, depressing business confidence and capital investments, the current political and economic backdrop could potentially lower return expectations for "the foreseeable future," she said.
The latest fiscal year saw Temasek divest S$28 billion in portfolio holdings, exceeding new investments – at S$24 billion - for only the second time in the decade coming out of the 2008-2009 global financial crisis. The year before, new investments of S$29 billion easily topped divestments of S$16 billion.
As of this past March 31, meanwhile, unlisted assets accounted for 42% of Temasek's portfolio, up from 39% the year before — a rising trend executives predicted could gather steam in coming years.
At the same briefing, Dilhan Pillay Sandrasegara, Temasek's executive director and CEO, noted that 69% of the portfolio's new investments last year went to private markets.
Ms. Png tied that pickup in private market investments to recent changes in the global policy outlook.
The "important" shift in U.S. central bank policy over the past half year, to a more dovish stance from a hawkish one, raises the prospect of a continued low-inflation, low-interest-rate environment that could leave returns "much more challenged going forward," said Ms. Png.
One response by Temasek: to become "more focused on private markets, because we think there's good value in certain areas today (and) we've actually been able to get better returns from our private investments in the past," she said.
Even so, Mr. Sandrasegara conceded it won't be easy. With more and more institutional money flooding into private equity, growth equity and venture capital, "we have to be mindful of the fact that it's going to be an expensive world out there" said the CEO.
"For good quality assets, we have to find ways (to) ensure that we get long-term value for those investments," said Mr. Sandrasegara. While "we're quite prepared for that enhanced competition … we have to make sure that we're very focused on the terms," he added.
Offsetting the three-point rise in the portfolio's private markets weighting, its holdings of stakes of listed companies exceeding 50% of their outstanding shares dropped to 12% of Temasek's portfolio, from 15% the year before.
Liquid stakes of less than 20% in listed companies and stakes of more than 20% through 50% held steady at 36% and 10% of Temasek's portfolio, respectively.
Executives attributed the sharp drop in the level of total shareholder returns for the latest period, from the 12.2% gain for the 12 months ended March 2018, to the rough year experienced by markets in Asia — a region whose long-term growth prospects have left Temasek investing just under two-thirds of its assets there.
Singapore's weighting in Temasek's portfolio slipped to 26% from 27% the year before, while China's share – also at 26% - held steady. Allocations to Asia ex-Singapore and China edged down to 14% from 15%.
North America, meanwhile, saw its share of the portfolio climb to 15% from 13%.
Elsewhere, Temasek allocated 10% to Europe, up from 9%; 6% to Australia and New Zealand, down from 7%; while its portfolio's weightings to both Africa, central Asia and the Middle and Latin America held steady at 2% and 1%, respectively.