PNB to increase overseas investment to 30% by 2022

The pandemic has created buying opportunities to pick up strong cash-rich companies at lower valuations, says CEO

by ALIFAH ZAINUDDIN/ pic by MUHD AMIN NAHARUL

MALAYSIA’S largest investment management company Permodalan Nasional Bhd (PNB) is ready to expand its overseas investments to 30% by 2022 from the current 8.5% as the fund embarks on a three-year plan to diversify its portfolio into real estate funds and private equities in emerging markets (EM).

PNB, which manages RM312 billion in assets, said it will continue to accelerate its portfolio diversification via investments into new asset classes and geographies, including global real estate with attractive yields under its newly unveiled Strategic Plan for 2020-2022 (also known as Focus 4).

Its president and group CEO Abdul Jalil Abdul Rasheed (picture) said the current pandemic has created buying opportunities to pick up strong cash-rich companies at lower valuations.

“What will change is our approach to investment. That needs to be fluid. Subsequently, it also needs to move in tandem with how the market behaves.

“For example, we will be introducing quant-based investing like Smart Beta to reduce the volatility of our equity funds. We will also be investing in real estate funds globally rather than just purely focus on brick-and-mortar assets.

“This will also give us an opportunity to co-invest alongside other funds internationally. Beyond that, we are also expanding our investments via external fund managers to EMs where we have had limitations in the past due to research coverage,” Abdul Jalil said at PNB’s virtual press conference yesterday.

Prior to the Covid-19 outbreak, the fund ventured into sub-segments of the real estate sector such as logistics and warehouse assets. Abdul Jalil described these segments as beneficiaries of the online shopping boom.

“We first started in Europe and are now looking at similar opportunities in Asia. Similarly, in private equity, we have been looking to diversify away from developed markets and look into Asia as well,” he said.

Last year, PNB’s international public equity generated the highest returns, contributing more than 11.6% to overall gross income of RM15.1 billion, despite a small exposure of 5.9%.

Its global exposure increased from 1.8% or RM4.7 billion in the financial year 2016 (FY16), to 8.5% or RM26.4 billion in FY19.

PNB group chairman Tan Sri Dr Zeti Akhtar Aziz said the fund’s current cash pile, which makes up 13.4% of its total assets, puts it in a good position to take advantage of the current market mispricing.

“We will continue to diversify our portfolio to a wider number of asset classes, thereby avoiding market concentration. The market weakness is an opportunity for us to accumulate good quality stocks at lower valuation. Our strategy plans outlined in the Focus 4 is, therefore, timely in taking us forward in this environment,” she said.

For FY19, PNB recorded positive results with its asset under management hitting RM312 billion, and units in circulation increased by 7.3% to nearly 254 billion. PNB also disbursed a total of RM13.2 billion in income distribution and bonus to its unit holders during the financial year, reaching a total cumulative income distribution of RM200 billion for all 14 funds since the asset manager’s inception.