Singaporean state investment firm Temasek Holdings on Tuesday reported a plunge in its returns over a one-year period amid a challenging economic environment compounded by trade tensions between the U.S. and China.
In its latest annual report, Temasek — a closely followed investor globally — said its one-year shareholder return was 1.49% for the financial year to March 31. That's a major decline from 12% in the prior 12 months.
Over a longer term horizon, the company's shareholder returns were 9% for a 10-year period and 7% for a 20-year timeline — compared to 5% and 7%, respectively, a year ago.
"We remain watchful around the risks of a late cycle recession in the US. Brexit and political fragmentation continue to weigh on Europe, while China has yet to move fully to restructure its economy for longer term sustainability," Lim Boon Heng, Temasek's chairman, said in the annual report.
"These issues have key repercussions on global sentiments and sustainable growth for the longer term," he added.
Facing greater macroeconomic headwinds, the company made more divestments than investments in the last financial year: Temasek let go of 28 billion Singapore dollars' worth of assets, while adding 24 billion Singapore dollars.
Overall, the value of Temasek's portfolio was 313 billion Singapore dollars (about $230 billion) as of March 31 — growing from 308 billion Singapore dollars in the previous year.
Dilhan Pillay Sandrasegara, chief executive of Temasek International, described the past year as "complicated and difficult."
He told CNBC's Tanvir Gill that factors such as the U.S.-China trade war affected the performance of Asian markets — where Temasek is heavily invested in.
Temasek International is the investment arm of Temasek Holdings.
Temasek, which invested mainly in Singapore companies in its early days, has turned into a global player in recent years.
More than 70% of the company's portfolio exposure is now outside its home country and spreading across other Asian nations, Europe and the Americas.
In the last financial year, Singapore and China were the two largest markets for Temasek's investments. New investments made in the world's second-largest economy include WeWork China, a co-working space provider, and Gracell Biotechnologies, a cell therapy company.
Given economic and geopolitical risks, Temasek will remain cautious in making investments but intends to be "opened and alert" to opportunities, said Png Chin Yee, the company's senior managing director for portfolio strategy and risk group.
But Png, who's also Temasek's head of financial services, warned that investment returns may be affected.
"If growth continues to be weak, the low interest rate environment is likely to persist into the foreseeable future. This could lower returns expectations for the longer term," she said.