Temasek Holdings realised a net profit of $10.7 billion on its S$198 billion ($157 billion) portfolio in the 2012 financial year to March 31, down 16% from its $12.7 billion profit from 2011, as a slowing global economy took its toll on the value of its portfolio assets.

The Singapore sovereign wealth fund’s net portfolio value grew from S$193 billion in the previous year. It invested S$139 billion during 2012 (while divesting S$87 billion), with a slight shift in holdings by geography that favoured the West over Asia.

North America and Europe collectively account for 11% of the portfolio, up from 8% in 2011, while assets in Australia and New Zealand grew to 14% from 12%. Asia ex-Singapore still has the greatest concentration of assets at 42%, although it is down from 45% the previous year. Similarly, Singapore assets were skimmed to 30%, from 32% in 2011.

Temasek views Asia as having healthy long-term growth potential, “though there will be structural and policy risks along the way, especially in the medium term”, says Temasek chairman S. Dhanabalan. Europe and the US, meanwhile, are seen as presenting “significant risks, as well as potential opportunities”.   

Portfolio exposure by sector remains little changed from last year, with financial services comprising the biggest segment, at 31% (down from 36%), followed by telecommunications at 24% (up from 22%) and transportation and industrials at 21% (down from 23%).

Temasek’s sizeable financial services exposure was likely a contributor to the drop in portfolio value, as share prices of banks have fallen over the past year. It owns stakes in lenders that include China Construction Bank, Industrial and Commercial Bank of China, Bank of China and DBS.

One notable sector is energy and resources, which doubled its proportion in the asset mix to 6% from 3% in 2011, with S$4 billion in net investments – largely in the US – made in 2012. Temasek says increased investment in the sector was a factor in its rise in North American exposure to 7% from 5%.

It invested S$2 billion in US-based FTS International, a shale gas fracking company, in April 2011 and paid S$300 million for a significant minority stake in US liquefied natural gas producer Cheniere Energy in May. The latter deal was not included in the full-year 2012 results.

The industry  is expected to be a growing portion of the portfolio in coming years as “sectors such as energy, resources and consumer goods and services are proxies to the demographic drivers of growth” in Asia and other growth economies, says Ho Ching, Temasek chief executive.

Chinese assets will also figure more prominently in the portfolio in the near term, as Temasek has recently applied for a $700 million qualified foreign institutional investor quota.