Government-linked REITs outperform private trusts: NUS study

Temasek REITs make up 54% of the REIT market value.

Here’s some good news for Temasek Holdings. After the sovereign investor registered lacklustre total shareholder returns in FY14, a new study by NUS revealed that government-linked REITs and companies actually outperform their private counterparts in terms of corporate governance.

According to the NUS report, entitled ‘The State as a shareholder: The case of Singapore’, between 2008 and 2013, GLCs accounted for an average of 37% of the stock market’s value of S$500 billion, while GLREITs made up 54% of the REIT market value of S$35 million.

“Between 2009 and 2013, GLCs outperformed non-GLCs in various corporate governance measures on the GTI, such as director independence, the nomination process for directors, disclosure of directors’ remuneration, communication with shareholders, as well as auditing and accountability,” the report noted.

Here’s more from NUS:

Better-than-average corporate governance and a clear business mandate have helped Temasek Holdings and Government-linked companies (GLCs) in Singapore perform better than the market, according to a new report published jointly by the National University of Singapore (NUS) Business School’s Centre for Governance, Institutions and Organisations (CGIO) and Chartered Institute of Management Accountants (CIMA).

For the study, GLCs and GLREITs were defined as organisations in which Temasek Holdings had a stake of at least 20 per cent between April 2012 and March 2013. A total of 23 such GLCs and GLREITs were examined.

GLCs were found to have better risk management processes, frameworks and stronger internal controls than non-GLCs, with the presence of separate board-level risk committees in 66 per cent of GLCs. Only four per cent of non-GLCs had such committees.

In addition, the majority of such organisations (79 per cent) had at least one independent director with industry experience compared to less than half of non-GLCs, because the nomination process, as well as the skills and experience sought, were disclosed more frequently by GLCs.