Singapore’s sovereign wealth fund Temasek plans to increase its private credit allocation to five per cent of its portfolio value, as it looks to the asset class to drive higher returns.

In the state-owned investment firm’s financial year results, the asset owner reported a net portfolio value of S$518bn (£299.9bn) on a mark-to-market basis as of 31 March 2026, which it said was up S$49bn from the previous financial year.

Within the results, Temasek said it sees “compelling opportunities” in three areas: AI, core-plus infrastructure and private credit.

Temasek said private credit currently accounts for two per cent of its portfolio value and that it aims to increase this to five per cent by 2031.

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As part of its future private credit allocations, Temasek said it will focus on senior secured structures across corporate lending, asset-backed financing and real estate credit.

The firm said it consolidated more than a decade of private credit investment activity into its private credit arm Aranda Principal Strategies in 2024 with an initial S$10bn portfolio. This has since grown to more than S$13bn, generating more than S$1bn in annual recurring income.

The sovereign wealth fund also said its division, Temasek Partnership Solutions, is expanding its alternative assets portfolio in partnership with its primary asset management platform, Seviora Holdings.

During the financial year, Temasek’s wholly owned subsidiary, Singapore-based private equity and investment firm Pavilion Capital, was integrated into Seviora Group, expanding Seviora’s investment capabilities in Asia-focused investment strategies.

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“As Temasek’s primary asset management platform, Seviora’s vision is to be a capital gateway between Asia and the rest of the world,” Gabriel Lim, executive director and chief executive, Seviora Holdings. “To realise this, we are scaling our capital base and broadening our ability to deliver long-term value to our clients across private equity, private credit, public markets, and tailored financing options.”

Overall, Temasek invested S$51bn during the financial year but divested S$31bn, resulting in net investment of S$20bn.

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