SINGAPORE - By most accounts, Singapore investment firm Temasek Holdings, which turns 40 next year, has just enjoyed a bumper year.
Buoyed by a strong showing on equity markets, the value of its portfolio rose to a record high of $215 billion as at March 31, it reported last Thursday. This was an 8.6 per cent jump over last year's $198 billion.
Total shareholder return - a measure of how hard investment funds have worked - was 8.86 per cent, nearly double the 4.6 per cent pace of the previous year.
The net profit for the entire stable of Temasek's companies also stood at an impressive $11 billion, unchanged from a year earlier.
But the sparkling performance belies two key challenges for the long term. One is whether Temasek can continue to notch up the kind of world-beating returns recorded for the past 39 years. The other is leadership and that of succession planning: Who is ready to take over the helm from chief executive Ho Ching?
Like all large investors, Temasek will find it increasingly difficult to get that extra bit of yield on its investments.
For one thing, the bigger the institution, the more difficult it will be to generate high returns, notes Singapore Management University finance professor Melvyn Teo.
"The challenge is for Temasek to maintain its stellar performance going forward. Research on hedge funds and private equity has shown that larger funds tend to underperform smaller funds," he says.