Khazanah resets button, splits assets into 2

The sovereign wealth fund’s portfolios are classified into 2 categories: Commercial and stategic funds

By ALIFAH ZAINUDDIN

Khazanah Nasional Bhd has revamped its investment playbook by classifying its portfolios into two distinct categories — commercial and strategic funds.

The move to overhaul the sovereign wealth fund strategic mandate came after the appointment of the new government and management team at the fund.

Under the new strategy, Khazanah’s investments in companies such as CIMB Group Holdings Bhd, Axiata Group Bhd, IHH Healthcare Bhd and Alibaba Group Holding Ltd would be part
of its commercial fund. Most of its investments in tech companies are also parked under the fund.

The commercial fund’s aim is to grow financial assets and diversify revenue sources for the nation. It will target a return equivalent to Malaysia’s Consumer Price Index plus 3% on a five-year rolling basis.

Companies such as Tenaga Nasional Bhd, Malaysia Airlines Bhd, Malaysia Airports Holdings Bhd and Telekom Malaysia Bhd will be part of Khazanah’s strategic fund. This is along with the likes of Silterra Malaysia Sdn Bhd and Khazanah’s key investments in Johor. 

The strategic fund holds assets that bring long-term economic benefits, carving returns equivalent to a 10-year Malaysian Government Securities yield on a five-year rolling basis.

Khazanah MD Datuk Shahril Ridza Ridzuan said the decision was made to ensure commercial returns from the fund’s investments.

“It is always a fine balance between commercial returns and public policy development. While we need to ensure that we are cognisant of the political pressure and public pressure on pricing, we still need to have a firm register for investments to happen.

“If not, we could swing too far in one direction and that would mandate unsustainable consumer prices,” Shahril Ridza told reporters at the Khazanah Annual Review 2019 in Kuala Lumpur yesterday.

Currently, Khazanah has investments in over 100 firms in more than 20 countries. With the existence of the pro-fit-based commercial fund, Shahril Ridza said Khazanah will be more active in realising values from its assets. But he did not go into specifics.

Bloomberg reported that the state-owned fund is considering a potential divestment of theme park Legoland Malaysia Resort for RM1 billion, including debt. In another development, Reuters said Khazanah is looking to reduce its overseas exposure and offload some of its foreign properties and tech investments.

Shahril Ridza did not deny the possibility of divesting Khazanah’s domestic and global assets, but said it must be mindful of the values attached to the assets.

On Legoland Malaysia, Shahril Ridza said the fund has yet to receive any offer from potential suitors to acquire its stake and is not in talks with any party.

He said the theme park has been a great success with record earnings before interest, tax, depreciation and amortisation, and was earnings positive.

On its properties abroad, Shahril Ridza said the fund is reviewing the assets it considers as less important such as those in London.

“As we review our costs, we will review these operations as well. Where we feel there is a better cost benefit to us, then, we will make the required decisions,” he said.