KUALA LUMPUR (Oct 17): The Retirement Fund (Inc) (KWAP), Malaysia's pension fund for civil servants, is eyeing impact investing as part of its plan to enlarge its asset allocation in the private equity market.

KWAP chief executive officer Nik Amlizan Mohamed elaborated that the fund's high interests are domestic companies that are working on food security, renewable energy and providing retirement services.

In August, KWAP expressed its goal to raise the percentage of its private market investments to 20% by 2025 when it launched its three-year transformation plan Teras 5. KWAP is pushing for a 7% return per annum and a gross fund size of RM200 billion by 2025.

During an online session on Monday (Oct 17) organised by the Malaysian Industrial Development Finance Bhd (MIDF), Nik Amlizan said that companies with strong cash flow and embracing the element of the environmental, social, and governance makes a good long-term partner for private market investments.

She said that KWAP has to invest a minimum of five years in the private market due to the nature of the private market having less liquidity compared to the public market.

When MIDF group managing director Datuk Charon Wardini Mokhzani asked Nik Amlizan if KWAP intends to sell down carbon intensive assets, she shared KWAP's desires to help companies in transition to being carbon neutral.

"If we just invest in green investments, we are only looking at 8% of what is available out there. You can't just be in these 8%, you must be looking at the 92% in order to alleviate them to become better," she said.

She also mentioned that KWAP is considering any company that can offer a return of 7%, naming the banks as a strong industry amid the present market volatility.

"If you look at the KLCI, at banking for example, [they] provide returns and dividends of 6% to 7%, that is strong. And if you look at the balance sheet, the asset qualities of banks are also strong," Nik Amlizan said.

A check with Bloomberg showed that KWAP has shares in several banks, including Malayan Banking Bhd, RHB Bank Bhd, CIMB Group Holdings Bhd, and Public Bank Bhd.

According to KWAP's latest annual report, its total fund size as of Dec 31, 2019 was RM147.5 billion with gross investment worth RM6.07 billion. Its total portfolio was RM68.31 billion and total income for equity was RM2.03 billion. Meanwhile, its fixed income for the total portfolio was RM68.42 billion and total income was RM3.05 billion.

KWAP currently has over 700,000 clients including indirect beneficiaries, which are the pensioners' spouses and children, Nik Amlizan said.