It was reported that Temasek Holdings beat the performance of major equity indices, and also that of Berkshire Hathaway, in the 10 years to March this year.
The returns of Berkshire were reported at 0.7 per cent, based on the performance of the company's stock price in the past 10 years.
I believe this article presented a slightly biased view of Temasek's relative performance.
It is correct to say that Temasek did better than an investor who bought Berkshire Hathaway stocks in March 1999 and held on to them until March this year. However, share price not only reflects a company's performance, but also incorporates an element of investor sentiment. This sentiment can be greatly influenced by factors beyond the underlying performance of the company. Thus, a comparison of investment records should not be made by comparing Temasek's shareholder returns against Berkshire's share price.
It is more appropriate to compare Temasek's performance against Berkshire's shareholder equity value. This value stood at US$57.9 billion in the first quarter of 1999 and was reported at US$109.3 billion in the fourth quarter of last year, the closest comparison against Temasek's November portfolio.
This represents a 6.56 per cent annualised growth, which is somewhat higher than Temasek's return of 5.4 per cent. Berkshire's shareholder equity in the fourth quarter of last year also declined 8.5 per cent from that in the first quarter of the year.
Taken on its own, with a return of 5.4 per cent, Temasek did well in the reported period. However, it may be painting too optimistic a picture to say that the agency beat Mr Warren Buffett's record. Mr Buffett is one of the most admired investors in the world and many look up to his long-term investment record.
By claiming that Temasek outperformed such a high-profile investor, based on his company's stock price, this article may lead some readers to an inaccurate conclusion on Temasek's performance.
