Temasek Holdings’ Magical Numbers

In their fiscal year ended 31^st March 2018, assets under management, is over S$300 billion.  Their annual return to shareholders is 12%, with a dividend income of S$9 billion.  These are phenomenal numbers.  Working back, we can assume they began with around S$500 million.  Temasek Holdings has earned an average annualised return of 15% per annum since 1974, where it starts.

When we consider the operating surplus prior to the beginning of Temasek Holdings, this correlates.  Operating surplus is value added and GDP for the country.  Much of operating surplus consists of the gross profit income, but is also profits realised from transactions, such as property sales, and capital gains, which are distinct from new production.  From 1969 to 1973, this operating surplus was S$550 million.

If we consider this to 2012, which is until the point I could verify the numbers independently, Temasek Holdings reported they had just under S$200 billion assets under management.  Under the previous numbers, Temasek Holdings actually averaged a 17% annual return.  We know that from 1974 to 2012, Singapore had operating surplus of around S$300 billion, with borrowing of S$380 billion.  Translation: in that period, Singapore had at least S$680 billion in cash flow for investment.

On Temasek Holdings’ balance sheet ending 31^st March 2012, total assets were S$770 billion.  Less the S$200 billion managed by Temasek Holdings, we have S$570 billion.  Assuming Temasek Holdings’ stated return of 17% then, the government managed to get a hold of S$700 billion, but was left with S$570 billion.  That would be a loss of S$130 billion, around 5% per annum.

We must also consider that surpluses and borrowings earn.  If we assume the 7% per annum, claimed by the GIC, we are looking at S$1.5 trillion from 1974 to 2012.  In summary, if Temasek Holdings actually earned the 17% per annum claimed on their website until 2012 – and it is 15% per annum now – and the rest of the surplus and borrowings earned 5%, we would have S$1.5 trillion somewhere, not just the amounts there now.

In summary, I am very doubtful that Temasek Holdings can actually outperform the market by such a margin consistently for the last 45 years.  I am not claiming malfeasance, misconduct or corruption.  I am merely stating that we should not believe everything somebody says, even if it is the government.  It is perfectly acceptable to have a healthy dose of scepticism.  It is reasonable to assume that no entity would actually state how much it actually has, or lacks.