By Kevin Brown in Singapore
Published: July 8 2010 07:19 | Last updated: July 8 2010 07:19
The value of the assets held by Temasek soared by 42 per cent to a record S$186bn ($134bn) in the year to March, reflecting the Singapore state investment agency’s dramatic recovery from the impact of the global financial crisis.

The market value of its investment portfolio – disclosed in its annual report published on Thursday – was S$1bn above that in March 2008, or before the crisis.

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It was also S$14bn higher than at the end of July last year, when Temasek said the global market recovery had pushed it back to S$172bn.

Simon Israel, Temasek’s executive director, said the record portfolio valuation was “a number obviously that we are pleased with”.

However, he said the group’s main focus was on the compound annual return to shareholders by market value, which rose to 17 per cent since the group’s foundation in 1974, from 16 per cent last year.

Mr Israel declined to disclose the current mark to market valuation of the portfolio, noting that it did not move in line with markets because about 23 per cent of investments by value were in unlisted securities.

He said that if recent investments in the resources and energy sectors were ignored, “you would make the assumption that the rest of our underlying portfolio has been moving in line with the markets, and that is a somewhat choppy picture at the moment.”

The group revealed that net profit fell to S$5bn, compared with S$6bn in the previous year and S$18bn in the year to March 2008.

The continued decline in net profits is likely to mean that some executives will suffer cuts in remuneration under the group’s pay structure, which defers some elements of compensation for up to 12 years, and is subject to clawbacks.

Temasek said it believed the worst of the risks of a global economic “meltdown” were over, but remained concerned about unresolved structural imbalances and the potential impact of the European sovereign debt crisis.

It said it was confident that Asia would maintain its long-term growth, and disclosed that 46 per cent of its portfolio by value was invested in Asia excluding Singapore at the year end, compared with 43 per cent in March 2009.

Only 20 per cent of assets were located in the advanced economies of the Organisation for Economic Cooperation and Development, compared with 22 per cent a year earlier, with the proportion in Singapore rising from 31 per cent to 32 per cent and the balance of 2 per cent mainly in Latin America.

“It is likely that we will overweight Asia and remain overweight Asia for the foreseeable future, given the global environment,” Mr Israel said.

Temasek has a declared long-term strategy of investing 40 per cent of its assets in Asia excluding Singapore, 30 per cent in the city state, 20 per cent in the OECD and 10 per cent elsewhere.

Mr Israel said Seatown, an affiliated investment company set up by Temasek with S$4bn of capital, had made several investments, but declined to disclose details.

He said Temasek expected Seatown to be open for investments from institutional investors in three to five years, and retail investors in eight to 10 years. Seatown would be able to hedge positions, but would not be a hedge fund, he said.

Mr Israel said Temasek was not actively seeking a replacement for Ho Ching as chief executive, and dismissed speculation that the recent appointment of Hsieh Fu Hua, a former chairman of the Singapore Exchange, as Temasek’s president signalled that he was in line to replace Ms Ho or to lead the search for a successor.

“There is no active, immediate search for a CEO,” he said. “Ho Ching is our CEO, she is continuing as our CEO.”

Mr Israel would not comment on whether Temasek might invest in BP, dismissing such talk as “speculation.”