Home Fintech Temasek Pulls Again on 2023 Fintech Funding Amid Difficult World Outlook

Temasek Pulls Again on 2023 Fintech Funding Amid Difficult World Outlook

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Temasek Pulls Again on 2023 Fintech Funding Amid Difficult World Outlook

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Since its basis in 1974 Temasek Holdings, the worldwide funding agency primarily based in Singapore, has demonstrated a formidable capability for navigating an ever-changing monetary local weather. Regardless of managing an expansive portfolio valued at S$382 billion as of 31 March 2023, the agency has not been resistant to the difficult monetary panorama marked by persistent inflation and tightening financial situations, which have pushed rates of interest larger and will result in decrease actual returns this 12 months.

The Temasek Overview 2023 media convention drew consideration to a number of different key components which have had a direct impression on funding returns. These embody the continuing US-China commerce battle, the geopolitical state of affairs in Ukraine, rising cyber dangers, commerce restrictions, and the escalating “local weather disaster”, which is prompting a worldwide enterprise shift in the direction of sustainability at a fast fee.

Within the face of such multifaceted challenges, Temasek strategically adjusted its course within the earlier 12 months, adopting a conservative method amidst world uncertainties and slowing its funding and divestment tempo. With liquidity tightening and deal exercise slowing worldwide, Temasek made investments of S$31 billion and divestments of S$27 billion, leading to a web funding of simply S$4 billion in comparison with the prior monetary 12 months’s web funding of S$24 billion.

Temasek fintech funding dips following 2-year excessive

Specifically, Temasek drew again on investing in fintech globally — a sector that Singapore’s state-owned investor had historically been excessive on, together with rising funding within the sector for the final two consecutive years. Temasek took half in at the least eight fintech-related funding rounds in every of 2021 and 2022.

Temasek Net Portfolio Value since Inception to 2022 Source: Temasek

Temasek Web Portfolio Worth since Inception, Supply: Temasek

Whilst the worldwide financial outlook worsened, the investor remained bullish on fintech heading into this identical interval final 12 months. In 2022, Temasek took half in funding rounds involving fintech corporations from India (FPL Applied sciences, OneScore), the UK (Thought Machine), Hong Kong (Amber Group), and ShopBack from Singapore.

Most notably, Temasek poured extra funding into Bahamas-headquartered cryptocurrency trade FTX Trade — which skilled a cataclysmic implosion and compelled Temasek to utterly write down its US$275 million funding within the digital asset fintech. This loss contributed to the general drop in portfolio worth of 5.2% within the 12 months ending March 2023, down from the document development it recorded the earlier 12 months.

Singapore stays Temasek’s major funding market in 2023, adopted by China and the Americas. Singapore portfolios have maintained their resilience considerably amidst the turmoil, however world investments took successful on account of larger rates of interest and falling valuations, significantly within the know-how, healthcare, and funds sectors.

Worldwide downturn slows Temasek fintech funding in 2023

Temasek Fintech Investment Sectors Suffer Blows Amid Global Challenges

The impression has been giant sufficient that Transportation & Industrials has overtaken Monetary Companies as the most important funding sector for Temasek in 2023, and mixed they comprise over half (54%) of the portfolio. Together with a slight lower in publicity to Monetary Companies on account of web divestments and a decline in market worth, significantly in its funds portfolio, Temasek has presumably overstretched its funding within the fintech house in 2023 after the buffer offered by the previous two sturdy years.

And it’s not simply the poor financial local weather or the disastrous collapse of FTX. On the Temasek Overview 2023, CFO Png Chin Yee cited the current US$1 billion positive for alleged “unlawful acts” the Chinese language authorities slapped on Ant Group, one other outstanding Temasek fintech holding, in a sweeping crackdown on the nation’s tech sector.

Though the hefty positive signifies that saga is probably going drawing to a detailed, Ant, which operates the world’s largest digital funds platform in Alipay, will face vital restructuring and the perils of working in China’s risky and more and more state-controlled monetary markets. A couple of fifth of Temasek’s investments are within the PRC.

The sovereign fund together with fellow state-owned investor GIC additionally face uncertainty after they joined the newest US$6.5 billion fundraising spherical by fee processing behemoth Stripe this 12 months, at a valuation of round US$50 billion — virtually half of what was Stripe’s valuation peak of US$95 billion in 2021. The destiny of considered one of fintech’s greatest startups will largely rely upon the restoration of a depressed US IPO market, after Stripe did not capitalise on its 2021 peak by going public that 12 months.

Sample of Non-Bank Financial Services in Temasek portfolio

Pattern of Non-Financial institution Monetary Companies in Temasek portfolio, Supply: Temasek

Stakes in conventional banks equivalent to DBS, ICBC (China) Restricted, and Indonesia’s HDFC Financial institution Restricted, alongside investments in fee giants like PayPal and Adyen, on-line billing and receivables software program BILL Holdings, and digital insurers equivalent to China’s Ping An Insurance coverage Group, have all contributed to shareholder returns.

Though valuations and revenues on this sector contracted in 2023 to yield a unfavorable 1-year complete shareholder return of minus 5%, these fintech pursuits have nonetheless helped to cushion Temasek’s portfolio worth over an extended interval, guaranteeing a gentle restoration from the lows of the COVID-19 period with a three-year complete shareholder return of 8%.

Development areas present Temasek portfolio increase

Temasek Fintech Investment Sectors Suffer Blows Amid Global Challenges

The world’s Tenth-largest sovereign investor as an alternative pivoted to numerous focus sectors it has recognized through the years, that are poised to profit from longer-term and rising tendencies. These development areas embody Shopper, Media & Expertise, Life Sciences & Agri-Meals, and Non-Financial institution Monetary Companies, which would come with a few of its fintech pursuits together with the likes of Visa and Mastercard. These sectors have skilled appreciable development, accounting for 32% of the portfolio, up from simply 5% a decade in the past.

Temasek ended the monetary 12 months with a web portfolio worth of S$382 billion, 1.8 occasions its portfolio worth in 2013, earlier than the corporate had ventured considerably into the Non-Financial institution Monetary Companies house. Over the previous decade, main developments in human-AI interactions, Trade 4.0 and 5.0, and the continuing digitalisation of companies have catalysed vital evolution of Temasek’s portfolio.

With its eye on future shocks, Temasek goals to leverage its extremely liquid place to proceed investing in rising tech tendencies, new sub-sectors, new markets, and co-investment alternatives. As a long-term investor, Temasek says it’s well-prepared to climate short-term volatility in efficiency, as its funding technique over the previous 20 years has proven, with 10- and 20-year complete shareholder returns standing at 6% and 9% respectively. The Temasek Overview 2023 media name recognized these figures as extra steady and consultant of the corporate’s efficiency.

Regardless of going through difficult markets within the brief time period, Temasek has acknowledged its intention to proceed evolving its portfolio to be resilient and forward-looking. Its constructive web money place offers the pliability wanted to grab future alternatives. Essentially the most notable of those rising alternatives is in generative AI, which holds immense potential to boost productiveness, remodel industries, and spur innovation.

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