I AM certain that Singaporeans want Temasek's investment
performance to outperform all long-term benchmarks adopted by its
management and the Government ('Temasek's assets hit record $186b';
last Friday).
However, there is the question as to how Temasek uses any excess
returns. Currently, it reinvests these returns back into its
investment portfolio. Hence, through Temasek's growing domestic
portfolio, some of these funds find their way back into the
Singapore economy. Temasek's role in fostering aspects of the
domestic corporate sector is well known.
Having been constructed over many years, Temasek's investment
portfolio is now mature, that is, it is self-sustaining. Therefore,
the portfolio is now satisfactorily able to absorb payouts to its
ultimate beneficiaries: Singaporeans.
The Government should explore alternative mechanisms to share
Temasek's investment successes with the population at large.
One recommendation is to distribute a small percentage of excess
returns directly to Singaporeans. For example, the
Government could consider reinvesting 80 per cent of excess
investment returns into Temasek's portfolio, while the remaining 20
per cent is paid out to citizens in the form of annual 'Temasek
Bonus Shares'.
A high watermark may be implemented to ensure that payouts are
sensible and do not eat into Temasek's long-term portfolio.
Temasek is a fiduciary tasked with generating investment returns
on behalf of Singapore and Singaporeans. Thus, any excess returns
over its rolling five-year benchmarks should accrue to the
Singaporean population. As with any prudent portfolio, much of the
returns should be ploughed back into the investment account while a
limited portion may be used for current consumption.
Sovereign wealth funds like Temasek clearly have a role in
managing a nation's wealth. However, in the economic context of
modern Singapore, transforming their role into delivering
additional concrete benefits for Singaporeans is the Government's
next challenge.
Imran Ahmed
