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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.


8 Responses to “Peking University Prof casts doubts on Temasek Holdings’ annual return of 17%”

  1. Jack said

    Is this true: Singapore has at least $350 billion SGD unaccounted for from historical surpluses and financing operations. Where did this money go to??

  2. i say what i think only... said

    if u injection of assets with 0 cost then your gains could be very high. the cost however, is on the government. for example if they inject 5b worth of singtel into temasek, it could be 5b gain from day 1. u average out over 35yrs with other state-own assets, 17% is easily achievable. the cost is on government to lose 5b worth of singtel assets but being a government, people is only concerned if it is a surplus or deficit (don’t know loss of singtel assets is counted inside the surplus or what). government need not be like listed company to be so transparent.

    Disclaimer: this is just my puny thoughts on how 17% could be justified. in no way there is any accusation to the gov on their arrangement with temasek as i knew nothing about it. just suggesting a possibility…

    hail temasek for their 17% returns which is not reflected in anyone’s CPF. talking about inclusive growth…

    • sadsingaporean said

      I like you last paragraph!! Hahaha. Nice.

    • d34dd said

      You have a more believable case than this crock pot professor plotting an exponential graph on top of Singapore Index. TH probably invested in a lot of private companies that have went public, the amount of profit there can never be captured by MSCI.

      Even amateur like me, “not a professor”, knows the frivolity of the exponential chart.

  3. Mel said

    ho ‘keching…keching’ 🙂

  4. finance guy said

    What Prof Balding says makes sense. This issue needs to be investigated further. 17% annualized is better than Madoff (who claimed 15% annualized).

  5. So to the injection of 1.1billion into SMRT what would SMRT and Temasek have got to say in their financial report.

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