No capital injection into LTAT

pic by TMR

THE government will not inject any capital into the Armed Forces Fund Board (LTAT) after the military pension fund declared its weakest-ever dividend and is working to revive its financials.

Defence Minister Mohamad Sabu (picture) said the government is confident of LTAT’s turnaround plan, which includes a shake-up of its management team and a new asset allocation plan, and believes the worst is over for the fund.

“Given the 2% dividend declared in 2018, we are assured that things will get better. With the rearrangement (of portfolio and management), there is no need for capital injection from the government,” Mohamad told The Malaysian Reserve.

LTAT is the latest of many financial scandals that have plagued the Pakatan Harapan federal administration.

The pension fund — which depositors comprise serving members of the armed forces — recently uncovered millions worth of irregularities including overpaid dividends amounting to RM556.6 million.

Its 2% dividend for the financial year ended Dec 31, 2018 (FY18), is a sharp decline from an average rate of 14.25% in combined dividend and bonuses over the last decade.

However, unlike Lembaga Tabung Haji (TH) and the Federal Land Development Authority (Felda), LTAT still has a credible fund size of RM9.4 billion as at end of 2018.

Since the start of the year, the government has injected fresh capital worth a combined RM24 billion into TH (RM17.8 billion) and Felda (RM6.2 billion), which is not inclusive of the RM19.9 billion assets it acquired from the pilgrim fund.

Putrajaya has also spent billions of ringgit as guarantor of 1Malaysia Development Bhd’s sizeable debt commitments. The government paid RM8.93 billion between April 2017 and May 2019 to service the state fund’s coupon payments and settlement to Abu Dhabi’s International Petroleum Investment Co.

Sovereign wealth fund Khazanah Nasional Bhd has also pumped RM800 million this year alone into national flag carrier Malaysia Airlines Bhd as the company continues to bleed from high operating costs and cutthroat competition.

LTAT CEO Nik Amlizan Mohamed had previously described its RM9.4 billion fund size as “steady” and is sufficient to ensure the returns to the country’s soldiers are intact and sustainable.

She also said the fund is in the middle of re-evaluating its portfolio and looking at various diversification options, including potential investments abroad and in government securities.

“That is in the plan, but it will take some time before we get there. At the moment, we need to bring the house back in order. We have to come up with a strategic asset allocation plan which is a journey that doesn’t happen overnight.

“We need to make sure that all the right ingredients are in place. One example is we do not have a fixed-income department, so we need to build that first. So there is still a lot of work to do first before we talk about diversification,” she said.

On equities, the fund currently has an over-concentration of shares in Boustead Holdings Bhd and its quoted subsidiaries.