This comes as domestic and global markets continue to be roiled by volatility
By DASHVEENJIT KAUR / Pic By ISMAIL CHE RUS
State investment fund Permodalan Nasional Bhd (PNB) foresees a more challenging year ahead, as the domestic and global markets continue to be roiled by uncertainties and volatility.
The country’s largest unit trust manager, with assets under management (AUM) of RM298.5 billion, intends to build buffers and diversify its investment portfolio to be ready to face the challenges, said PNB group chairman Tan Sri Dr Zeti Akhtar Aziz.
“The environment going forward is going to be very different. It will become more challenging, highly unstable, significantly more complex, interconnected and disruptive.
“Building buffers and having a more diversified portfolio will address some of these challenges,” she said in PNB’s 2018 annual report.
Recognising that the challenges will not be easy to overcome, Zeti said the group will focus on five key priorities this year — which includes undertaking a midterm review of its Strategic Plan 2017-2022 and accelerating the diversification of its investment portfolio both domestic and abroad.
According to PNB group CEO and president Datuk Abdul Rahman Ahmad, the state fund intends to expand its global footprint by investing into global property funds.
“We believe the opportunity in real estate lies globally and in certain segments such as logistics.
“By investing in these funds or similar real estate-based investment vehicles, our funds will be able to access a sound potential source of recurring yields, while also benefitting from future capital gains in buoyant markets,” he said in the annual report.
A quick check shows PNB has a total of 38 investment properties across Malaysia with a net lettable area of 9.2 million sq ft and four strategic international properties with 1.05 million sq ft of net lettable area.
In Malaysia, PNB also owns eight hotels and resorts — with a combined 1,319 rooms — and three golf courses.
Adding to that, as part of its effort to have a strong pipeline of new products in its portfolio, PNB will be launching another new variable price fund this year.
This follows the success of its two new funds — ASN Equity 5 and ASN Sara 2 — launched last September which had an investment amounting to RM804 million by the end of 2018.
“Going forward in 2019, our key area of focus will be to boost recurring investments by unitholders,” Abdul Rahman said.
To recap, PNB’s AUM for 2018 grew by 6.9% to RM298.5 billion, comprising RM46.9 billion of proprietary funds and RM251.6 billion of unitholders’ investment via 14 unit trust funds.
Abdul Rahman said the growth was underpinned by its unit trust funds, which saw their units in circulation increase by 7.9% to 236.6 billion units, while the number of accounts grew from 13.2 million to 13.8 million.
The ongoing diversification efforts are reflected in its portfolio allocation with fixed income increased to 6.6% as at end-February 2019 from 5.8% a year earlier, while private investments accounted for 2.3% compared to 1.9% in the previous year.
Meanwhile, international investments accounted for 4% of its portfolio as at end- February 2019, compared to 2.7% a year ago.
Abdul Rahman said despite the soft performance of the domestic equity market, PNB remains positive and believes in the long-term value of the market.
“In terms of boosting domestic public equity performance after a tough 2018, PNB will continue to implement the value creation plans for its strategic and core companies.
“This will involve ensuring that the strategic companies arerigorously executing their value creation plans to drive their core earnings growth, as well as accelerating engagement with our core companies to find pathways for their value to recover,” he added.
PNB holds controlling stakes in 10 strategic companies namely Malayan Banking Bhd, Sime Darby Bhd, Sime Darby Plantation Bhd, Sime Darby Property Bhd, SP Setia Bhd, UMW Holdings Bhd, Velesto Energy Bhd, Chemical Co of Malaysia Bhd, Duopharma Biotech Bhd and MNRB Holdings Bhd.
Eight of the strategic companies have had their market capitalisation reduced between 0.01% and 8.4% last year, while a decrease in net profit between 25% and 50% was seen in two of its strategic companies.
PNB also has stakes in more than 40 core companies such as Telekom Malaysia Bhd, Axiata Group Bhd, MMC Corp Bhd, Tenaga Nasional Bhd and BIMB Holdings Bhd where it owns more than 10% in equity or RM1 billion in value.
The state-owned fund will start investing in the equity markets of several advanced and emerging markets within three years and has identified six global funds managers that could be enlisted in the endeavour.
As of 2018, PNB’s portfolio comprises public equity at 70.8%, private investment (2.2%), cash and money mar- ket (17.4%), fixed income (6.5%), real estate (2.8%) and others (0.3%).
Most of its investments, or 96.7%, are still in the country, while the remaining 3.3% are overseas investments.