Peking University Prof casts doubts on Temasek Holdings’ annual return of 17%
Posted by temasektimes on June 4, 2012
An economics professor from Peking University Graduate School, HSBC Business School Professor Christopher Balding has cast doubts on the reliability of Temasek Holdings’ proclaimed annual return of 17 percent.
In a landmark article titled “A Brief Research Note on Temasek Holdings and Singapore: Mr Madoff Goes to Singapore”, Prof Balding asked if Temasek Holdings really achieved such a high annual return for the last 35 years:
“Temasek reports an average annual return of 17% for 35 years despite Singaporean stock returns averaging less than 8% during this same time period. Given the range of stock market returns and its portfolio companies’ returns, it is highly improbably that Temasek has earned the returns claimed in its annual reports.”
He argued that the figure is unlikely based on a review of all public financial and economic data.
“The Singaporean sovereign wealth fund Temasek Holdings states in its 2010 annual report that it has earned since inception an average annualized rate of return of 17%. This number, however, claims such a high level of sustained returns as to warrant closer examination. Based upon publicly available market data on Singaporean stock indexes, there appears to be a rather significant discrepancy between the returns claimed by Temasek and the returns produced by domestic equity markets.”
Prof Balding concluded that there is no evidence of 17% annual returns from either Singaporean or global stock markets or from the portfolio companies owned by Temasek and the figures may be due to injection of funds from Singaporean government surplus:
“Given the returns claimed by Temasek, if it was created with a one-time initial capital endowment, given its current published assets under management, it would have started with between $750 million and $1 billion SGD.3 Consequently, any further government surpluses would have been accumulated elsewhere.”
Temasek Holdings is one of the two major sovereign wealth funds of Singapore supposedly owned by the Ministry of Finance. Its current CEO is Ho Ching, the wife of Prime Minister Lee Hsien Loong.
Read Prof Balding’s article here.