[SINGAPORE] Did Temasek Holdings lower its risk-adjusted hurdle rate because it has become harder to deliver shareholder returns above that target?

The hurdle rate, said Tan Chong Lee, Temasek chief investment officer yesterday, is derived from a model that takes into account several factors including country risks.

"The way we derive the risk-adjusted hurdle rate is on an investment-by-investment basis, so it's not a top-down macro hurdle rate," he explained when asked about the drop in the hurdle rate.

Since its inception in 1974, Temasek's hurdle rate has been 9 per cent, but this has fallen to 8 per cent in the past two years, the Singapore investment firm disclosed for the first time yesterday.

For the year ended March 31, 2012, its one-year and two-year total shareholder return (TSR) was 1.5 per cent and 3 per cent respectively, while the three-year TSR was 15 per cent. TSR since inception was 17 per cent.

Temasek looks at every investment on a case-by-case basis and takes into consideration factors specific to those investments, Mr Tan said.

For example, when it invests in growth markets, it looks at the risks of those countries in coming up with the hurdle rate.

"It's a blended hurdle rate for the entire portfolio, as opposed to a top-down hurdle," he said.

Dilhan Pillay Sandrasegara, head of portfolio management, said that though returns were below the hurdle rate and the wealth added (WA) bonus remained negative, staff morale was still high.

"I would say that senior management is not here to look at bonuses, WA bonuses, from year to year. We are here to help drive the company's long-term investment strategy."

For financial year 2011 and 2012, the WA was a respective $8.8 billion and $12.6 billion, below its risk-adjusted hurdle.

WA bonuses are awarded into a pool when Temasek achieves returns above the hurdle rate. Should returns fall below the hurdle and WA turns negative, it is subject to a clawback.

"So yes, we would expect no WA bonuses this year for performance for financial year ended 31st March 2012, but for other members of the company, there are different parts of compensation pool available to them," said Mr Sandrasegara.

"So morale in the company is still positive . . . we are there because we believe in our mission."

On Temasek's recent senior hires and giving them similar ranks and responsibilities, Mr Sandrasegara said that this would deepen management strength and is part of how the company builds its pipeline of leaders.

It helps the company as everyone "works together as one cohesive team, looking at things together, different angles, different perspectives, brings a richness to debates and discussions, and helps us be assured that the strategy we face is the right one", he said.

Temasek now has four presidents: Gregory Curl, John Cryan, Lee Theng Kiat and Boon Sim.