Khazanah restructures fund amid weak 2018 results

KUALA LUMPUR: Sovereign wealth fund Khazanah Nasional Bhd unveiled a new investment strategy that classifies its portfolio into a commercial and a strategic fund, even as it reported weak results for last year.

The restructuring comes at a time when Prime Minister Dr Mahathir Mohamad is looking to raise money for government coffers, depleted by a fiscal deficit and a massive debt from a multi-billion-dollar scandal at state investment fund 1MDB.

“Our performance in 2018 was affected by several key global and domestic developments,” Khazanah managing director Shahril Ridza Ridzuan, who took charge of the fund in August, told reporters today.

“At the same time, the government initiated a reset of Khazanah, which involved significant changes including a refreshed mandate,” he said.

Reuters reported last month, citing sources, on Khazanah’s plan for a new investment playbook aimed at delivering more cash to the government by pruning its stakes in non-strategic assets.

According to the report, Khazanah, traditionally more of a strategic investor, had split its investments in over 100 firms spanning more than 20 countries under the two new categories.

Khazanah today said its investments in companies including 27%-owned CIMB Group Holdings, 36%-owned telecommunications firm Axiata Group and Alibaba would be part of its commercial fund.

The commercial fund will target a return equivalent to Malaysia’s consumer price index plus 3% on a five-year rolling basis.

Firms such Tenaga Nasional, Malaysia Airlines, Malaysia Airports Holdings and Telekom Malaysia will be part of Khazanah’s strategic fund.

Khazanah said the realisable asset value of its portfolio value fell to RM136 billion in 2018 from RM157 billion in the previous year.

It swung to a loss before tax of RM6.27 billion in 2018 from a profit before tax of RM2.89 billion in 2017, hit by fewer divestments, higher impairments and lower dividend income.