I was talking to my friend this afternoon and I believe we were talking about bonus when my friend blurted, “Temasek is doing quite well….”
No. Wait. No, wait a minute. No!
This is not what I read this morning online. I wondered how she got this impression. From what I read on straitstimes.com, Temasek’s portfolio grew from S$193 billion to S$198 billion, however, its net profit fell from S$12.7 billion to S$10.7 billion.
I finally understood what happen when I saw the front page of the print version of the Straits Times:
What is this? What’s wrong? I can take a few numbers from here:
1. The portfolio grew 2.6% by S$5 billion from $193 billion to S$198 billion
2. The net profit drop 15.9% by S$2 billion from $12.7 billion to S$10.7 billion
3. Straight lining the investments, dispositions and earnings within the year, the net margin ratio can be simplistically calculated as a drop of 22% from 6.6% ($12.7/$193) to 5.4%. ($10.7/$198) (Ignoring the differences in time weighted and dollar weighted returns calculations.)
Hence, you have a choice of a few headlines:
A. Temasek Portfolio Rises to Record S$198 Billion (the current headline for the printed version)
B. Temasek Holdings portfolio grows but net profit declines (the headline for the online version)
C. Temasek Portfolio Rises by 2.6% to Record High
D. Temasek net profit Drop by 15.9% despite record portfolio size
E. Temasek profit margin Drop by 22%
Obviously, the Straits Times chooses headline A which simplistically contains the word “Rises” which augurs positivity. For a substantial percent of population who are headlines readers, this positive seed is planted.
Seriously, I don’t really know why this made headline. The portfolio rises a mere S$2.6 billion, which could be attributed to:
i. Increased investments, and/or
ii. Revaluation gains through appreciation (Through “independent valuers”, but seriously it’s not hard to ask for a 2.6% optical increase in valuations from your valuers who YOU HIRED.), and/or
iii. Revaluation gains through currency translation.
I don’t subscribed to printed Straits Times and I did not get a chance to read the whole printed article. I don’t care to read it. For those who read it, could it be a simple situation of portfolio managers expanding their portfolio empire at the expense of returns. Bigger portfolio = more fees = higher renumeration. Aka moral hazard?
I’m a headline reader and I don’t like it when you, you Straits Times, messing with my head. Oh yes, and my friend ‘s head too. I call this WHIP – Wrong Headline Impression Propaganda. My friend has been WHIPPED!