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It has been 50 years since Temasek was incorporated as an investment company in Singapore. Wholly owned by the Singapore Minister for Finance, Temasek was established in 1974 to own and commercially manage investments and assets previously held by the Singapore Government. These include companies such as DBS, Keppel Corp, and Singapore Airlines (SIA), which are still part of Temasek’s portfolio today. At its inception, Temasek’s portfolio was valued at $354 million. In the latest released on 9 July 2024, Temasek announced that its Net Portfolio Value (NPV) is $389 billion for the financial year ended 31 March 2024. This is up $7 billion from the same period last year. Temasek’s 20-year and 10-year Total Shareholder Return (TSR) are at 7% and 6%, respectively. As a , Temasek offers valuable investment lessons for anyone looking to improve their investing acumen. Here are four notable highlights from the Temasek Review 2024 worth focusing on. As a generational investor focused on achieving sustainable long-term returns, Temasek, like many of us, must endure market downturns. This is why it is vital for Temasek to build a resilient and forward-looking portfolio capable of withstanding these inevitable challenges. Over the past 20 years, recessionary periods such as the Global Financial Crisis, the COVID-19 pandemic, and the China Market De-rating have impacted financial markets. While individual years may see a decline in Net Portfolio Value (NPV), the key is that NPV continues to grow over the long term—something Temasek has consistently achieved. Similarly, as investors, we should aim to generate returns over the long term rather than be drawn to short-term gains. This requires a disciplined approach and a mindset focused on sustainability and growth. In a globally connected world, it’s crucial for investors to maintain a globally diversified portfolio. Although Temasek is a Singapore company, and Singapore remains the country where it holds the largest proportion of its assets (27% as of 2024), Temasek’s portfolio is well diversified across major economies. As of 2024, Temasek holds 22% of its portfolio in the Americas, 19% in China, 13% in Europe, the Middle East, and Africa, 12% in the Asia Pacific region (excluding Singapore, China, and India), and 7% in India. When we compare the figures from 2024 to those from 2004, we can see how global diversification has been a key strategy for Temasek. Twenty years ago, Singapore’s assets constituted 52% of Temasek’s portfolio. Today, this number has significantly decreased to 27%. Diversification across geographical regions has proven to be a valuable strategy, enabling Temasek’s portfolio to grow even when specific regions encounter challenges. For example, from 2004 to 2014, China’s stock market performed well, with the MSCI China earning a return of about 9% per annum, while the MSCI North America provided a return of 4% per annum. In the past decade, however, MSCI North America outperformed, delivering a return of 13% per annum, while MSCI China only delivered a return of 2% per annum. For investors, a globally diversified portfolio helps avoid over-concentration in a single region, reducing the risk of lower returns if that region underperforms. By spreading investments across various geographical areas, investors can take advantage of growth opportunities in different markets, balancing out potential losses in underperforming regions. While Temasek has generally been a net positive investor over the years (investing more than it divests), this does not mean it does not divest. In fact, divestments are one strategy Temasek uses to recycle capital. These divestments can include selling investments, selling shares in the public market when a company is listed, or redeeming bonds it has invested in. For FY2024, Temasek divested $33 billion, with approximately $10 billion resulting from the redemption of capital by Singapore Airlines and Pavilion Energy for their mandatory convertible bonds and preferential shares, respectively. During the same period, Temasek invested $26 billion. Similarly, for investors, divesting is a way to capture returns and generate funds to deploy into other investment opportunities. It can also serve as a means to rebalance a portfolio and achieve the desired asset allocation. As investors, we can choose to invest in the same listed companies that Temasek has invested in, whether they are listed on the Singapore Exchange (SGX) or other overseas stock exchanges. However, it is worth noting that over the years, Temasek’s portfolio of unlisted assets has grown significantly as a proportion of its overall portfolio. As of 2024, 52% of its portfolio consists of unlisted assets, compared to 30% in 2014. In other words, this portion of Temasek’s portfolio is generally quite difficult for the average retail investor to access. It is important to recognise this because it means that we cannot fully replicate Temasek’s portfolio. While we can observe and learn from their investment strategies, it may not always be possible to take the same positions they do. Temasek’s performance remains crucial for Singapore, as Temasek is one of the entities contributing to our Net Investment Returns Contribution (NIRC) framework. This framework allows the government to use up to 50% of the expected long-term real returns (including capital gains) from net assets invested by MAS, GIC, and Temasek. As a global investment company, Temasek is focused on delivering sustainable returns over the long term. Its ability to generate these returns ensures that Singapore can continue to invest in important public services and infrastructure projects, benefitting both current and future generations. It's free! Don't miss out on the latest financial market movements. FSMOne aims to help investors around the world invest globally and profitably, follow for bite-sized finance analyses and exclusive happenings.