KUALA LUMPUR: Khazanah Nasional Bhd will focus on executing its portfolio rebalancing strategy and strengthening its financial position in 2019, as well as developing policies, guidelines and processes for a new dual-fund structure to support the refreshed mandate.
Managing director Datuk Shahril Ridza Ridzuan said the state-owned investment fund will pursue two investment objectives – commercial and strategic.
The commercial objective focuses on growing financial assets and diversifying revenue sources for the nation, while the strategic objective is to hold assets that bring long-term economic benefits.
The commercial fund is an inter-generational wealth fund with a targeted return equivalent to the Malaysian Consumer Price Index plus 3% on a five-year rolling basis. This fund includes public assets such as CIMB Group Holdings, Axiata Group, IHH Healthcare and Alibaba.com; and private assets such as The Holstein Milk Company, Sun Life Malaysia, WeLab and Palantir.
Khazanah plans to rebalance the commercial fund via a shift to long-term strategic asset allocation, diversifying portfolio to be more balanced across geographies and sectors as well as to improve risk diversification.
“In Malaysia at least, a big chunk of our assets are tied up with a few companies. Over time, that will have to be restructured to provide a more balanced portfolio spread over more sectors and more geographies to take out the concentration risks,” said Shahril.
He said more transactions, including divestments, are likely to happen in the commercial fund as it transitions.
“We should only be executing deals that makes sense for us, where we get the right value for those assets and the divestment proceeds can then be redeployed towards restructuring the portfolio and doing more investments.”
Shahril said Khazanah is primarily an equity investor and will always experience more volatility in terms of pricing and the movement of a share’s market value.
“It doesn’t change our investment philosophy, which is investing for the long term. Investing for the long term will require you to absorb short-term volatilities,‘ he added.
Meanwhile, the strategic fund is a developmental fund with a targeted return equivalent to the 10-year Malaysian Government Securities yield on a five-year rolling basis, as well as measurable economic benefits. This fund includes strategic assets such as Telekom Malaysia, Tenaga National, Malaysia Airlines, Malaysia Airports and PLUS Malaysia; and developmental assets such as Silterra, Iskandar Investment, Themed Attractions Resort & Hotels, Pinewood Iskandar Malaysia Studios and Medini Iskandar.
Khazanah plans to develop the strategic fund by generating enhanced shareholder return for strategic assets, achieving commercial sustainability for developmental assets and delivering economic impact and identifying new strategic investments with capacity to deliver economic benefit.
Overall, Khazanah will be guided by its investment philosophy of earning appropriate risk-adjusted financial returns, generating sustainable returns and integrating ethical and responsible considerations into investment activities.
Source: The Sun Daily