Temasek and GIC underperform peers, raising questions on China strategy and future direction

Singapore’s two flagship sovereign wealth funds (SWFs), Temasek Holdings and the Government of Singapore Investment Corporation (GIC), are facing renewed scrutiny over a decade of underperformance, according to a report by the Financial Times (FT). Despite managing assets worth hundreds of billions of US dollars, both organisations have averaged just 5% annual returns over the past ten years in nominal US dollar terms — placing them among the weakest performers out of 50 global peers evaluated by Global SWF. In contrast, entities such as the Canada Pension Plan Investment Board (CPP) and Ontario Teachers’ Pension Plan reported stronger returns of 9.2% and 7.4% respectively.

Costly exposure in China’s tech sector

Temasek’s most visible losses in recent years have come from its exposure to Chinese technology and education companies during a period of aggressive regulatory change in China. In the second quarter of 2021, Temasek acquired significant stakes in several Chinese firms, including Baidu, Kanzhun, 17 Education & Technology, and New Oriental Education Technology. It also disclosed a US$466 million position in Didi Global, which listed in the US shortly before Chinese authorities announced a cybersecurity investigation into the firm. According to regulatory filings, Temasek held a total of US$562 million across six Chinese tech firms — including TAL Education and Pinduoduo — as of June 2021. But these investments quickly plummeted in value after Beijing intensified crackdowns on tech platforms and banned for-profit tutoring. Didi's shares fell by more than 40% within weeks. Education firms New Oriental and TAL lost over 75% of their market value. The combined losses on these six positions were estimated at over US$224 million. Temasek later stated that its global investments were guided by intrinsic value and risk-adjusted return assessments, but critics questioned the fund’s judgement in entering politically sensitive sectors at a time of growing regulatory unpredictability.

Investment ideology questioned: The case of FTX

Separate from its China exposure, Temasek also faced public criticism for its US$275 million investment in the failed US cryptocurrency exchange FTX — a decision widely seen as reflecting deeper issues in the fund’s investment ideology. The FTX investment was made during two funding rounds between October 2021 and January 2022, shortly after Ho Ching stepped down as Temasek’s chief executive in October 2021, a position she had held since 2004. FTX later collapsed, and the investment was written down to zero. In a Facebook post on 26 November 2022 — which is no longer publicly viewable — Ho Ching acknowledged the loss, calling it “painful” and described FTX as “a badly managed company without adult supervision.” She called that the investment was “egg on our face,” but also defended Temasek’s decision to write it down to zero, saying this would help “clear the head” without being “blinkered by wishful thinking.” Yet Ho also used the episode to restate Temasek’s long-standing willingness to take bold positions, saying some of its best returns came from being contrarian: “Temasek can afford to be contrarian because it has its own balance sheet and can think long term.” This framing has raised questions. Critics argue that a contrarian mindset, without rigorous due diligence, can lead to misjudged high-risk decisions. In FTX’s case, although Temasek claimed an eight-month due diligence process, the firm’s public disclosures suggest participation in earlier rounds. Post-collapse, court filings revealed severe governance failures, with FTX’s new CEO calling it the worst case of corporate mismanagement he had seen — worse even than Enron. Temasek itself later conceded that its “belief in the actions, judgment and leadership of Sam Bankman-Fried... would appear to have been misplaced.”

GIC’s low-risk model underperforms benchmarks

While Temasek’s high-risk bets have drawn headlines, GIC has faced criticism for a different kind of underperformance. Its portfolio lagged its own reference portfolio — a model comprising 65% global equities and 35% bonds — by 3.1 percentage points annually over the past five years. The reference portfolio is not a benchmark in the conventional sense, but rather a guide to the level of risk the Ministry of Finance is prepared for GIC to take on. Nonetheless, critics note that GIC’s low-volatility profile may have come at the cost of foregone returns during a prolonged period of strong market growth. A former GIC executive told the Financial Times that the fund’s mandate is to preserve capital with modest growth, not to “shoot the lights out.” But others have questioned whether such caution remains appropriate in a fiscal environment where the government is increasingly reliant on sovereign wealth contributions. While GIC has largely avoided the headline-grabbing write-downs seen in Temasek’s portfolio, it has not been immune to substantial losses. In November 2024, GIC sold its 50% stake in the WestQuay shopping centre in Southampton to Hammerson for £135 million — significantly below the £299 million it paid in 2007. The estimated loss, adjusted for currency, was around S$637 million. Earlier that year, it exited its 17.5% stake in the Bluewater shopping centre near London, booking a further estimated loss of S$718 million. These divestments reflect the long-term structural decline in UK retail property, shaped by evolving consumer habits, the rise of e-commerce, and broader economic headwinds following the pandemic. GIC has also been linked to the Adani Group, one of India’s largest conglomerates. In October 2022, it was reported that Adani was in early talks with investors — including GIC — to raise at least US$10 billion to support expansion in clean energy, ports, and cement. While Temasek has since exited its Adani positions, GIC declined to comment when contacted by The Straits Times. The group is now facing legal and reputational challenges, including recent bribery and fraud allegations in the US against its top executives. Despite these episodes, GIC continues to report long-term returns consistent with its mandate. For the 20 years to 31 March 2024, it posted a real annualised return of 3.9%. The fund has reiterated its focus on diversification and price discipline, emphasising portfolio resilience over short-term performance. Even so, the recent setbacks underline that a conservative investment posture does not shield a fund from deep-cycle risks — particularly in sectors once considered stable, such as commercial real estate and regulated industries.

Critics: Overconcentration and weak understanding

Donald Low, Senior Lecturer and Professor of Practice at the HKUST Institute for Public Policy, commented on the FT’s findings in a Facebook post on 6 December. “Even I, as an amateur retail investor with a bias for China in the last six years, have matched Temasek and GIC’s mediocre ten-year performance.” He argued that while returns in China were possible, they required deep familiarity with industries and firms — insight the funds may have lacked. Retired banker Chris Kuan added in the comments that Temasek’s strategic overexposure to China — compared to US assets — had exacerbated losses. “If Temasek did poorly from China, the impact cannot be understated when bigger, less volatile returns could be had from the US if the allocations had been more balanced.”

Looking ahead: reforms and rising expectations

Both Temasek and GIC are under increasing pressure to adapt. Temasek is undergoing structural reform, reorganising its operations into three distinct investment groups: domestic control stakes, global equity positions, and asset management partnerships. GIC has replaced key investment leaders and adjusted its asset allocation in response to performance concerns. With both funds contributing around 20% of Singapore’s annual budget, their ability to deliver consistent returns has broad fiscal implications — particularly as the country’s population ages and social spending needs rise. As one executive from a Temasek-owned company told FT: “They have had a tricky few years, but now they need to figure out how they can drive returns in the next five to ten years when there is so much noise in the markets”. Temasek’s latest shift — a significant increase in exposure to large-cap US technology firms during the second quarter of 2024 — reflects its continued appetite for bold thematic plays. However, the timing raised eyebrows, as much of the buying occurred just before a broad correction in July. Analysts have questioned whether the fund once again moved too late to capture the upside. While some tech shares have since recovered, the pattern echoes earlier critiques of Temasek’s approach: reacting to prevailing market narratives rather than anticipating them. The question now is whether its internal restructuring will lead to more disciplined and anticipatory investment execution. GIC, meanwhile, remains committed to a more diversified and measured strategy. But recent losses in real estate and select emerging-market bets show that caution does not guarantee immunity from long-term risk. With both funds navigating a more volatile and fragmented global investment landscape, the coming decade may be defined less by short-term wins than by their ability to combine strategic clarity with operational discipline.