Temasek posts “record portfolio of S$308 billion” but doesn’t disclose its management costs

It was reported in the Straits Times yesterday (10 Jul) that Temasek Holdings' has posted "record portfolio of S$308 billion".

"The Singapore Government-owned investment firm's net portfolio value grew to a record $308 billion, up from $275 billion a year ago," ST reported. It said that Temasek's portfolio hit a 12.19 per cent one-year return for the financial year ended March 31, 2018.

"The latest results came as key listed holdings posted strong gains over the year; market capitalisation grew 44 per cent for DBS Group Holdings, 91 per cent for Ping An Insurance and 73 per cent for Alibaba Group Holding," it added.

"Annualised returns over 20 years was 7 per cent, up from 6 per cent a year ago. Dividend income was $9 billion for the year. Net profit improved to $21 billion from $14 billion a year earlier."

But it also said that for the last FY, Temasek invested S$29 billion and divested S$16 billion.

Temasek did not disclose its actual management costs

Meanwhile, popular financial blogger Leong Sze Hian has observed that Temasek does not like to disclose its management costs like Norway’s sovereign wealth fund (SWF) does.

In fact, Bloomberg reported in Jan that Norway's US$1 Trillion Oil SWF was taken to task over its rising management costs. The Norwegian Finance Ministry has pointed out that the management costs of its SWF fund have risen "significantly over time" and are projected to hit 3.5 billion kroner (S$750 million) this year, up from 2.1 billion kroner (S$480 million) in 2014. It also pointed out that the fund is now running ahead of schedule in terms of employees.

With this information, Mr Leong has worked out that the management costs of Norway's SWF is only about 0.05% of its portfolio value. But in the case of Temasek, it does not disclose its management costs including critical information like CEO's annual remuneration to the public at all.

"What we know is that Temasek’s administrative expenses were S$8.4 billion in 2017, on a net portfolio value of S$275 billion," Mr Leong noted.

In 2011, then Secretary-General of National Solidarity Party Hazel Poa voiced out public concerns over the lack of transparency in Singapore's SWFs. She said that sufficient public information in the internal workings of GIC and Temasek Holdings is undoubtedly in the interest of all Singaporeans, as is a demonstrably robust system of check and balances in the management of Singapore's SWFs.

"It is also a disturbing state of affairs when Temasek Holdings, with about 400 employees, can report an $8 billion administrative expense without incurring significant public scrutiny," she added. "$8 billion is more than one-sixth of our national budget."

She also pointed to Norway's sovereign wealth fund as being successful and yet transparent with its citizens. "There is a world of difference between GIC being transparent to stakeholders on one hand, and foolishly telegraphing its investment strategy to competitors," she said and maintains that better financial transparency is the best way to serve Singaporeans.

Tan Cheng Bock supports call for transparency in Singapore's SWFs

At the time, Presidential candidate Tan Cheng Bock also supported Hazel's call for having more transparency financially.

He told the public that he could promote this through his proposed annual statement from the President if elected. Unfortunately, Tony Tan beat him by a thin margin to become the President in 2011. Tan Cheng Bock's narrow loss deeply shook the ruling PAP, which later changed the constitution to effectively bar Tan Cheng Bock and many others from contesting in the 2017 Presidential Election.

Nevertheless, Hazel's public statement did spur Temasek to issue its own statement immediately, saying that Temasek's "administrative expenses" also include expenses of subsidiary companies such Singapore Airlines, PSA, and others, and not just Temasek only.

"We take this opportunity to reassure our broader public as well as Ms Poa, that we are keen to expand our stakeholder base in a responsible, prudent and measured manner," Temasek said.

However, it did not give any detail breakdown of its "co-mingled" administrative expenses for the public to see.