2009: “Temasek Holdings lost $39b”


Of late, Facebook has a new feature. The algorithms throw up old articles it thinks you should be reminded of reading again. In the last few days, I’ve come to see a few friends circulate an old article from 2009 titled “Temasek Portfolio lost $39.91b”

Some, without checking the date, assumed this news was current and gone on to make a fool of themselves sharing and proclaiming like it was the biggest news of the day.

Well, how about this for news – at present Temasek Holdings manages $215b of portfolio, up from $130b since 2009. In the greater scheme of things, the $40b they lost was more of a little trip than a full stumble. In like manner, even if they make another $40b in a few years, it does not matter.

Now, here is an opportunity for us to learn something for our own invest adventures. Don’t be too happy if your portfolio makes money in the short term, don’t be upset if it loses. Little peaks and troughs does not make much sense until you factor in this piece of magic: the time horizon. Time amplifies your gains and losses greatly. Time is what churns out wealth.

When Warren Buffet was asked how long he would hold a purchase for, he answered the now famous word, “forever”.

If you want to invest for value, you need to do two things: consider your purchase carefully and not have urgent need to use the invested money. In such a case, temporary fluctuations shouldn’t worry you. Complications arise when you take on the role of a trader. Traders flip purchases around, buying and selling for a quick buck. Markets move very quickly, in days Then you have to make an ocean of decisions and put your money at tremendous risk because you must either take gains or losses fast.

Sovereign wealth funds such as the Government Investment Corporation (GIC) have time horizons that span much, much longer – up to even 20 years ahead. This is a very long period of time. These two decades could turn up 3 maybe 4 recessions. Markets that don’t exist today could become multi-billion dollar industries tomorrow.

The time-strategy is not the only defence against risk our nation has. If you look at how Singapore’s wealth is managed, you’ll see a pattern. The Central Bank (or MAS) is the safest repository of our money, earning only on interest to banks. The GIC takes on a little bit more risk and buys into markets overseas, never local. Temasek Holdings on the other hand has a larger risk appetite, taking equity into local companies.

These three agencies spread investment risk around, building up wealth for both growth and development of Singapore. Our Constitution allows for GIC to contribute a certain amount to the national budget, this averages about $8b a year. It must be said that the GIC does not get involved with whatever the Ministry of Finance does with this money – whether it is for welfare, CPF interest gains, transfers, grants… it is the Government that decides where to spend the gains.

People hear of gains and losses incurred by national fund managers and jump to conclusions. This is why many netizens can’t decide if GIC is too rich, or if they have been losing too much money. One indicator you could use is to look at the overall health of the nation. Is the dollar strong? A strong dollar could indicate strong reserves. Is GDP healthy? If it is, it means our local companies are turning up strong profit.

However, profit or loss make little sense to the man in the street. The question we want to ask is this – what’s in it for the citizens? As long as we continue receiving national Budget top-ups, CPF transfers and a variety of Government spending…all without increases to income tax, then it means Singapore’s piggy bank is safe.





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