Friday 29 Mar 2024
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KUALA LUMPUR (March 2): Khazanah Nasional Bhd managing director Datuk Amirul Feisal Wan Zahir said the sovereign wealth fund will be consolidating its funds into a single diversified portfolio with a realisable asset value (RAV) of RM124.8 billion as part of its new “advancing Malaysia” strategy. He announced this at Khazanah's Annual Review 2022 event on Wednesday (March 2).

The move to consolidate Khazanah's previously segregated commercial and strategic funds is core to building financial strength of the sovereign wealth fund to deliver sustainable value for Malaysians, according to Amirul Feisal.

“Companies like Telekom Malaysia Bhd (TM), Malaysia Airports Holdings Bhd and et cetera, we do demand commercial returns regardless. 

“The [answer to the] question of what is strategic or not strategic will depend on who you ask. It is easier for us to put everything into one and within that, there are different asset classes that you see depending on performance.

“What we are working towards is a strategic asset allocation that tries to get maximised returns based on the risk appetite that we have,” Amirul Feisal shared.

Meanwhile, he added that despite the aggregation of funds, the sovereign wealth fund will still need to work with the government to decide on the sale of any assets with national interest. 

“For example, certain assets which are deemed needed to be held like TM. Now for certain assets, that is where we will work towards whether or not we can reduce our stake. But I have to mention that this is evolving. 

“As an example, the banking industry is strategic but does not have to be safeguarded by the shareholding of a key player. Financial stability is highly strategic but it is actually governed by the central bank not necessarily through share ownership. There are various ways [to safeguard national interest] and this is evolving. 

“We have to work with the government to determine what is national interest for them, which limits the shareholding, but beyond that we continue to rebalance the portfolio in order to our resilience and financial strength,” Amirul Feisal added. 

Khazanah’s overall portfolio moving forward will consist of four portfolios, namely the investment portfolio, the Dana Impak portfolio (with a RM6 billion allocation), developmental assets and special situation assets with distinct return expectations and priorities. 

The RM120.3 billion RAV investment portfolio now consists of public equities in developed markets, such as US-listed Palantir Technologies Inc, SoFi Technologies Inc and German-listed Auto1 Group SE, as well as real assets and private equities.

Notably, Khazanah chief investment officer Tengku Datuk Seri Azmil Zahruddin Raja Abdul Aziz explained that its investments in global public markets under the commercial fund (now the investment portfolio), whose returns declined to 1.6% in 2021 compared with 26.2% in 2020, was affected by its exposure to public equities in China, which remains one of the sovereign wealth fund’s key focus markets amid the regulatory scrutiny of the technology sector in the world's second-largest economy last year.

On the other hand, he added that the developmental assets portfolio of RM4.5 billion in RAV will hold long-term development investments with the potential to deliver high economic impact, while its special situation assets will hold assets that require a turnaround in terms of profitability and sustainable operating cash flows, such as Malaysia Aviation Group Bhd (MAGB).

When asked by The Edge if any capital was deployed under the socio-economic-focused RM6 billion Dana Impak portfolio, Amirul Feisal said that the fund is in its early stages as it had only been approved by Khazanah’s board in November last year but noted that there are potential investments in the pipeline to be announced when confirmed.

No plans for major asset sale 

Asked if there are any plans to sell MAGB, Amirul Feisal said that there are no plans to partner with any airlines but to focus on the airline’s operations, noting that the restructuring gave Khazanah an opportunity to reset the balance sheet, pointing to the RM15 billion reduction in liabilities.

“At the same time, MAGB group chief executive officer Captain Izham Ismail has done very well in managing the cost and his plan now is to focus on operations to ensure that yields are maintained and that operationally, it remains profitable [and] the borders need to open.

“At the moment, it’s early days as all airlines are in the same position. The focus right now is the turnaround plan and focusing on operations,” Amirul Feisal said.

The sovereign wealth fund chief also said that there are no suitors for PLUS Malaysia Bhd, the largest highway concessionaire and operator, despite market rumours.

When asked by The Edge if the sale of semiconductor foundry SilTerra to Dagang NeXchange Bhd (DNeX) was a good idea coming to a year in, Amirul said that the sale was the right thing due to the nature of the semiconductor industry.

“When you actually look at the semiconductor industry, you need to be part of the whole ecosystem in order for people to share technologies and ideas, which requires huge investments.

“At the end of the day, it is actually a good thing for the country because then you have a more vibrant and sustainable business which is now connected to the semiconductor ecosystem in China,” Amirul Feisal said.

Edited ByJoyce Goh
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