‘So little’?: Why critics of Temasek’s 10.5% returns in a bull run are getting it wrong
To pan its returns is to miss the basic point of sovereign wealth, which is to aim to survive market winters
WHEN state-owned investment company Temasek on Wednesday (Jul 8) unveiled its FY2026 review, the headline figures were undeniably strong: a net portfolio value surging to a record S$518 billion, bolstered by a net investment gain of S$20 billion and a one-year Total Shareholder Return (TSR) of 10.5 per cent.
But there was a fair bit of criticism. “A low-cost S&P 500 index fund would have given a better return,” one Facebook user commented.
Another pointed to Temasek’s 20-year TSR of “only” 6.8 per cent. “So little,” the user said, claiming that he generated similar returns on his own portfolio over the same period. “But I didn’t pay millions to do it.”
The critiques run along familiar lines. Last year, a Financial Times piece pointed out that Temasek and sovereign wealth fund GIC have at times lagged behind global peers.
Speaking in Parliament earlier this year, Senior Minister of State for Finance Jeffrey Siow clarified that the returns generated by GIC and Temasek are “reasonable and within expectations”, given their respective mandates and risk profiles.
But the chorus of criticism can be expected to get louder.
On a fully mark-to-market basis, Temasek’s one-year TSR fell from 11.9 per cent in the previous year to 10.5 per cent, while its 20-year TSR fell from 7.4 to 6.8 per cent.
Only the 10-year TSR improved, from 5.8 per cent in FY2025 to 7.1 per cent in the latest period.
Temasek points to the stronger Singapore dollar as a reason for a moderation in its TSR. In US dollar terms, the one-year TSR, for example, would have improved to 14.8 per cent, from 12.5 per cent previously.
Even so, some investors look domestically at the astronomical, record-breaking runs of Temasek’s own subsidiaries – such as DBS and ST Engineering – and wonder why the parent company’s TSR does not mirror the high-flying yields of its standout stars.
Buoyed by a wider equities market revival in Singapore, defence contractor ST Engineering generated a total return – with dividends reinvested – of 61.6 per cent in the same 12-month period ending Mar 31, 2026.
DBS, South-east Asia’s biggest bank, managed a total return of 31.1 per cent over the same period.
Singtel , the telecommunications giant majority-owned by Temasek, achieved a total return of 44.8 per cent.
The benchmark Straits Time Index (STI) returned 29.2 per cent over the same period.
Over the longer 20-year timeframe, ST Engineering, DBS and Singtel generated annualised total returns of 11.2 per cent, 12.6 per cent and 8.1 per cent, respectively – comfortably outperforming Temasek’s 20-year TSR of 6.8 per cent.
One reason is that it is not right to compare a globally diversified, generational investment house to single-stock performers or a narrow set of global public equity peers.
After all, Temasek is not an equity mutual fund tasked with tracking the STI, and neither is it a private equity fund with a narrowly-defined mandate.
Instead, to understand its returns, we must look at how the firm is actively engineering clarity out of what its leadership describes as a “polycrisis world” of geopolitical fragmentation, sticky inflation and rapid technological disruption.
The bedrock and the J-curve
Indeed, the massive, stable returns from mature entities like DBS, ST Engineering and Singtel are not an indictment of Temasek’s broader portfolio – they are its bedrock.
These assets sit within the Temasek Portfolio Companies (TPCs) segment, which accounts for 43 per cent of the overall portfolio.
The predictable cash flow and dividends from these companies are the engine that affords Temasek the capital and risk appetite to hunt for higher-growth, transformative global investments.
Those transformative bets live primarily within the Global Direct Investments (GDI) segment, which makes up 38 per cent of the portfolio.
And this is where the critique of “lagging returns” often arises.
Some global peers ride broad, highly liquid public equity indices. Temasek, however, takes structural bets in some unlisted and emerging assets that follow a “J-curve” return profile – meaning they require significant upfront capital and patience before realising exponential gains.
A prime example is Temasek’s push into generative artificial intelligence (AI), which it views as a long-term structural driver of value creation.
Backing deep-tech leaders like OpenAI and Anthropic, Temasek has set a target to grow its AI-focused portfolio exposure to up to 15 per cent by 2031.
These investments will not match the immediate quarterly cash-flow yields of a mature engineering firm today, but they are essential guardrails against portfolio obsolescence tomorrow.
Building a buffer against the polycrisis
With the Singapore stock market on a tear, it might be tempting to suggest that Temasek reallocates more of its capital into high-flying equities.
But it deliberately chooses not to – and rightly so.
Instead, in a macro environment threatened by shifting supply chains and the eventual normalisation of interest rates, which could squeeze bank net interest margins, Temasek is utilising a barbell strategy to temper risk.
To insulate the portfolio against potential shocks, the firm is expanding its alternative allocations, specifically targeting a 5 per cent exposure to core-plus infrastructure and 5 per cent to private credit by 2031.
As Temasek’s leadership noted during the review, private credit offers highly attractive risk-adjusted returns with significant downside protection and equity subordination.
This strategic buffer might drag on absolute top-line growth during a bull run, but is specifically designed to prevent catastrophic lows during a market winter.
When you strip away the noise, a 10.5 per cent return and a 10-year TSR climbing to 7.1 per cent – in a profoundly complex geopolitical year at that – is a masterclass in capital preservation and targeted growth.
Between its foundational TPCs, its J-curve deep-tech GDIs, and the vital global multiplier effect of its Partnerships, Funds and Asset Management (PFAs) segment, Temasek’s S$20 billion net deployment shows its deliberate, methodical approach.
Indeed, to judge Temasek against an artificial benchmark or a single high-performing bank would be to miss the fundamental point of sovereign wealth.
At the end of the day, we must remember that this is a vehicle engineered to survive the winter, not just harvest in the summer.
