Temasek Assets Break $400 Billion as AI Bets Boost Returns

Singaporean state-owned investor Temasek Holdings Pte is ramping up its exposure to artificial intelligence and the Americas, a shift which helped push its net portfolio value to S$518 billion ($401 billion) in the last financial year.

Temasek generated total shareholder returns of 10.5% in local currency terms in the year ending March 31, according to a new valuation methodology that will become its standard. Based on its outgoing metric, the firm’s US dollar returns were around 16.4% — almost exactly matching the rise of the S&P 500 Index during the same period.

The giant investment firm is now planning to further increase its exposure to AI assets, having already taken stakes in firms including OpenAI, Anthropic and Nvidia Corp. Temasek plans to more than double its allocation to AI from 6% to up to 15% by 2031.

The shift underscores how critical — and lucrative — AI investments have become to investors around the world despite rising fears that a rally in the sector is becoming a bubble.

The technology has shaken up global markets, driving staggering returns for tech stocks and fueling hopes of huge initial public offerings to come. Temasek’s push is in line with a rush to allocate to AI companies among global funds, although executives at the state-owned investor said they will take a careful approach.

Temasek International Chief Investment Officer Rohit Sipahimalani pointed to Nvidia, which trades at a lower earnings multiple than many hot tech stocks despite becoming almost synonymous with the AI trade.

“Is that frothy? I don’t think so,” he said. “But maybe other companies are, so I think you’ve got to look at it company by company.”

Temasek’s assets in the Americas, which are second only to its home nation of Singapore, hit 26% of the portfolio in the most recent fiscal year – a huge jump from the roughly 11% it represented in 2016. The portion in China rose slightly to 17%, although the exposure remains well below the 24% it represented a decade ago.

“Given the opportunities right now — we’re looking at AI, core-plus infrastructure, private credit — they’re global but a little more biased to the US,” said Sipahimalani. “You would probably see this inch up a little bit from where it is right now.”

Temasek’s swelling asset size puts it among the ranks of the world’s top 10 sovereign wealth funds, said Diego Lopez, managing director at consultancy Global SWF. “The performance this year is really strong,” he said, pointing to Temasek’s US dollar returns versus its peers.

To be sure, Temasek has classified its whole stakes in a range of companies as part of its AI exposure. That includes established technology companies with diversified revenues such as Microsoft Corp., chipmaker Taiwan Semiconductor Manufacturing Co. and Chinese gaming company Tencent Holdings Ltd.

With 23% of its portfolio already made up of telecommunications, media and technology companies, part of the shift will be funded by selling out of software providers that are likely to lose from the rise of AI, executives said.

Japan’s Government Pension Investment Fund saw a 16% gain in Japanese yen terms in same period, while other investors with large private equity holdings such as Canada Pension Plan Investment Board and British Columbia Investment Management Corp saw 7.8% and 6.7% returns respectively.

Global Mix

In the coming years it will aim to take more high-conviction bets in global markets: making a smaller number of bigger investments, said Temasek Global Investments President and outgoing head of Europe, Middle East and Africa Nagi Hamiyeh. On the private side this would typically mean a large minority stake and deeper involvement in shaping a company’s strategy.

“We need to go very deep in more select areas where we have better domain knowledge and we have a better chance of winning,” he said. “There are deals that could be larger but very few deals would be less than $200 million.”

Temasek plans to lift its exposure to private credit from 2% of the portfolio to 5% by March 2031, defying concerns around rising defaults and opaque valuations. When some other asset managers faced pressure, Temasek was able to buy their stakes via the secondary market.

“We don’t see a very industry-wide issue in the private credit market and we are still seeing a lot of opportunities,” said Alpin Mehta, Temasek’s head of real estate and private equity capital solutions.

Local Market Gains

Much of Temasek’s gains came from public equities, which have regained prominence at the firm in recent years. That’s despite its fiscal year including the start of the Iran War, which slammed global stock markets and trimmed the firm’s net portfolio value around 2%. Its Singapore-listed stocks were especially buoyant, with the city’s Straits Times Index up 23% during the year ended March 31.

Shares of weapons and aerospace manufacturer Singapore Technologies Engineering Ltd. were up 59% during the last financial year, while Singapore Telecommunications Ltd. jumped by 44%. Both are majority-owned by Temasek.

The firm made S$51 billion in investments while selling S$31 billion in assets during the fiscal year, resulting in net investments of S$20 billion.

Seviora Group CEO Gabriel Lim said the firm is still looking to expand the platform by potentially absorbing other Temasek-sponsored investment vehicles, pending the completion of an ongoing review. In November, Seviora took over Pavilion Capital in a move that helped push its assets under management to $75 billion as of December.