The $404B (S$518 billion) Temasek Holdings Pte is bullish towards artificial intelligence, core-plus infrastructure and private credit through 2031, betting that AI in particular will define returns.
Temasek expects to hike exposure to AI investments to up to 15%, up to 5% in core-plus infrastructure and up to 5% in private credit by March 31, 2031, Dilhan Pillay, chief executive officer said at the fund’s annual review briefing. The AI and infrastructure targets exclude exposure through its listed Temasek Portfolio Companies (TPCs).
“There are opportunities where demand is underpinned by long-term structural trends, and where patient capital like Temasek’s can add value,” the CEO said, citing the reason for selecting the three sectors.
Pillay described the three sectors in distinct terms. Private credit deployment will be limited to the plan’s 5% allocation cap, he said. Core-plus infrastructure, meanwhile, is viewed as a quasi-equity investment with long-duration, predictable cash flows. AI investments, by contrast, will be pursued exclusively through equity allocations.
AI featured most prominently in Pillay’s remarks, which he framed as central to Temasek’s ability to sense opportunities and adapt its portfolio. “AI is integral to how we sense emerging opportunities, adapt our portfolio, and thrive as an institution,” he said.
Pillay stated that Temasek is investing across the AI value chain, backing some companies that lead individual segments and others that are vertically integrated across multiple areas, creating what he described as a flywheel effect. Still, the CEO cautioned that the bulk of the portfolio’s AI-related opportunity lies not in backing AI companies directly but in adoption across existing holdings. “The remaining 85% of our portfolio must be focused on AI adoption for competitiveness,” he said. “That is where the rest of our portfolio will see value capture.”
He laid out Temasek’s broader AI approach as resting on four pillars: enabling its own workforce through a firm-wide digital fluency program and an emerging agentic AI strategy; “AI-proofing” its portfolio companies by engaging their boards on AI risk and opportunity; scaling AI investments selectively across the value chain; and driving broader adoption through immersion programs it has run for TPC leaders in Silicon Valley, Shanghai and Hangzhou.
Pillay pushed back on the notion that AI will shrink job opportunities for young workers. “AI replaces tasks — it does not necessarily replace jobs,” he said, adding that entry-level talent and graduates should view the shift with optimism. “The world is ripe for them. This is an exciting time — one they should embrace with positivity.”
The T2030 targets were unveiled alongside Temasek’s full-year results. One-year total shareholder return came in at 10.5%, driven largely by strong performance among listed, Singapore-based TPCs and realized gains from divestments.
Pillay said returns were dented by two factors: conflict in the Middle East, which weighed on public markets performance through February before a rebound in April and May, and a strong Singapore dollar, which he said shaved about 2% points off returns through currency effects alone. On a constant-currency basis, one-year TSR was 12.9%, while U.S. dollar returns came in at 14.8%, he said.
Longer-term returns, which Temasek treats as its primary performance measure, remained steadier: 20-year TSR stood at 6.8% and 10-year TSR at 7.1%. The investor also completed a shift to fully mark-to-market financial reporting this year, a transition it began four years ago and which affected about 25% of its portfolio, according to Pillay.
The strategy update follows Temasek’s first major organizational restructuring since 2011. Pillay said the new structure — organized around Temasek Portfolio Companies, Global Direct Investments, Partnerships, Funds and Asset Management Companies — was designed to sharpen accountability and strategic focus while preserving what he called a “OneTemasek” culture, with Temasek International serving as an institutional enabler.
Temasek’s roughly 40-40-20 allocation across those three segments has held broadly steady since 2018, Pillay said, though this year’s mix stood at 43% for Singapore-based TPCs and 38% for Global Direct Investments. He said that shift reflects relative market performance rather than a pullback from global investing.
Geographically, 52% of the portfolio is in Singapore-headquartered companies, but 73% of underlying exposure sits outside Singapore, Pillay said, citing continued expansion in the U.S. and China. China exposure grew by about S$10 billion over the past year and by roughly S$24 billion over the past decade, he said, even as the fund maintains a roughly even split between listed and unlisted holdings to preserve flexibility to redeploy capital.
Temasek also reaffirmed its commitment to reach net zero emissions by 2050, with Pillay cautioning that “the path is not linear” and requires coordinated action across the economy.