I am reviewing the Temasek 2013 Annual Report when I come across this interesting picture on page 7 of the report (page 9 in the PDF viewer).
It says that investments made by Temasek prior to March 31, 2003 have earned an annualized rate of return of 16% over the last decade. It also says investments made after March 31, 2003 earned an annualized return of 20% over the last decade. I don’t have their portfolio so I can’t prove or disprove that, but here is what I don’t understand.
If you go one page up to page 6 of the report (page 8 in the PDF viewer), you get this interesting picture.
In this picture, Temasek says that its 10 year return ending March 31, 2013 was 13%.
So here is my question: how do investments made prior to March 31, 2003 earn 16% over the last decade and investments made after March 31, 2003 earn 20% over the last decade magically average out at 13%?
Christopher Balding
* The writer is a professor of business and economics at the HSBC Business School at the Peking University Graduate School. An expert in sovereign wealth funds, he has published in such leading journals as the Review of International Economics, the Journal of Public Economic Theory, and the International Finance Review on such diverse topics as CDS pricing, the WTO, and the economics of adoption and abortion. His work as been cited by a variety of media outlets including the Wall Street Journal and the Financial Times. Prof Balding received his Phd from the University of California, Irvine and worked in private equity prior to entering academia. The article first appeared in his blog, http://www.facebook.com/baldingsworld.