Malaysia’s largest unit trust manager plans higher allocation in fixed income and alternative assets 

by THE MALAYSIAN RESERVE 

OPTIMISTICALLY buoyant after delivering a commendable result for the 10.6 million unitholders of Amanah Saham Bumiputera (ASB) against the year’s difficult market conditions, Permodalan Nasional Bhd (PNB) maintained that it will continue to be prudent in pursuing its portfolio diversification. 

President and group CEO Ahmad Zulqarnain Onn said PNB has always and will continue to be vigilant in making investment decisions for its unitholders, regardless of opportunities and pace offered by the various investment classes. 

Malaysian companies emerged as the largest contributor to returns in 2022, driven by ASB’s investments in financial services, plantation and healthcare sectors, says Ahmad Zulqarnain

“We can go faster (in diversifying portfolio), but we chose not to (because) we are always careful and judicious,” he said at a recent briefing on ASB’s performance. 

He continued that PNB will remain steadfast in their diversification efforts with higher allocation in fixed income and alternative assets. 

For financial year 2022 (FY22), ASB unitholders will receive a distribution payout of 4.6 sen a unit — comprising an income distribution of 3.35 sen and a bonus of 1.25 sen — and an additional bonus of 0.5 sen a unit. The total distribution of RM8.9 billion will benefit 10.6 million unitholders owning 186.4 billion ASB units. 

PNB, by far the largest unit trust manager in the country, has more than 12.4 million investors holding 15.2 million accounts, with unit in circulation in excess of 283 billion. Its assets under management has grown steadily to RM343.1 billion (as at November 2022), from RM336.7 billion in 2021 and RM322.6 billion 2020. 

Centre for Market Education (CME) director Razim Ismail lauded PNB’s performance and regarded the incremental growth of investors as the market’s vote of confidence in the fund manager’s portfolio allocation decisions. 

“Despite the prevalent market risks globally, we thought PNB’s 2022 performance was highly commendable. 

“Factoring in the domestic market uncertainties due to the recently concluded GE15 (15th General Election), PNB still managed to deliver returns above the benchmark of 12-month fixed deposit rate and has extended an additional bonus of RM0.50 per unit,” he said. 

Razim added that the increasing new accounts and units in circulation highlights investors’ confidence of “PNB’s robust investment selection requirements (that) have proven to be favourable in the challenging investment environment”. 

The International Monetary Fund forecasted 2022’s world growth ex-China to contract, with most major stock markets in the red. Year-to-date until Nov 30, the S&P 500 lost 14.4 % versus a 26.9 % gain in 2021, while UK FTSE increased marginally by 2.6% against a 14.3% growth in 2021. 

Japan’s Nikkei 225 eased 2.9% (2021: 4.9%) , China’s SHZ300 slumped 22% (2021: -5.2%) and MSCI Asean lost 6.8% versus 2% last year. FTSE Bursa Malaysia KLCI (FBM KLCI), the local benchmark index, deteriorated by 5% as at Nov 30. 

Putra Business School’s Assoc Prof Dr Ahmed Razman Abdul Latiff said the year 2022 has been tough on the equity markets and equally tough for equity fund managers. 

“Last year (2021), when they announced the dividend of 4.25% plus 0.75% bonus, even though the local FBM KLCI and Asian indexes registered negative growth for the year, the S&P 500 and FTSE 100 still managed to show positive results, which probably helped PNB in boosting up its return on investment. 

“But in 2022, all major indexes, whether local or overseas, have registered negative growth over the year, which heavily affected PNB’s ability to declare a higher dividend rate,” said Ahmed Razman. 

PNB’s Ahmad Zulqarnain cautioned that 2023 would be equally challenging with the global economy facing a continuing despite moderating interest-rate hikes, persistent inflationar y pressure and recessionar y fears, as well as a deteriorating geopolitical situation. 

Despite the gloomy forecast, he is hopeful that the re-opening of China, the world’s secondlargest economy, and the US Federal Reserve’s moderating stance on interest-rate hikes would have a cascading positive effect on the global markets. 

“The upside (for the market) is of course on China opening up (against its zero-Covid strategy) despite the high death rates.” 

Economists are confident that PNB will still be able to generate positive returns in 2023

The reopening could see China’s GDP growing between 5% and 6% next year, from the projected 3.5% this year, he added. 

The other silver lining on offer for 2023, he continued, would be the Fed’s moderating rate hikes and improving geopolitical situation from the Ukraine conflict. 

CME’s Razim, however, was more optimistic and believes that positive domestic developments will have a bigger bearing on PNB’s performance in 2023. 

“As the performance in 2022 was mainly contributed by Malaysian companies, we are hopeful it can be replicated and improved further with political stability, consistent policies and improving general market conditions. 

“We have also seen the Malaysian Ringgit and FBM KLCI strengthened recently, along with the appointment of the new government. 

“We believe if this remains well across the year and if global factors are subdued, PNB’s performance in 2023 will be very positive,” Razim concluded. 

Ahmed Razman on the other hand cautioned that the performance of the global market will continue to drag PNB’s results in 2023. 

“It (2023) will not be an easy year as well for PNB as both World Bank and the International Monetary Fund have forecasted that next year will see a slower global economic growth, including Malaysia. 

“Nevertheless, I am confident that PNB will still be able to generate positive return on its investments, but the rate of dividend probably will still be in the region of 4.75% to 5%,” he added. 

Ahmad Zulqarnain highlighted that although PNB’s overseas portfolio has been increasing and delivering fair performance steadily, its contribution to the overall income shrank in 2022. 

“Global portfolio allocation increased to 19% from 17% in 2021, but the contribution to income decreased to 9% versus 30% in 2021. 

“This year, Malaysian companies emerged as the largest contributor to returns, driven by ASB’s investments in financial services, plantation and healthcare sectors,” he added. 

As at end-November, PNB’s exposure to public equity assets stood at 62%, real estate 18%, private investments 13% and cash 7%. Within its domestic public equity portfolio, nearly 30% of PNB’s equity are held in strategic companies. 

The confidence accorded by unitholders has encouraged ASNB to expand its product suite, launching ASN Sukuk, its first sukuk fund, 

on Nov 24, as well as offering new services via Wakaf ASNB. 

Launched in October 2021, Wakaf ASNB has hit RM30 million in funds and is slated for its maiden dividend distribution in the first half of next year. 

Ahmad Zulqarnain said the product has proven to be a successful experiment for PNB as one of the innovations in Islamic finance. Since its launch, the fund has become one of the fastest-growing wakaf funds in Malaysia. 

He added that the perpetual fund showed that people are willing to do good with their money, as long as they have a trusted partner who is committed and managing the fund in a proper way. 

The Wakaf ASNB applies the concept of wakaf muabbad, namely a perpetual donation in which the wakaf fund will be retained as the principal investment to generate potential annual returns. 

Wakaf ASNB is made available in collaboration with the Federal Territory Islamic Religious Council (MAIWP). 

Ahmad Zulqarnain said that the fund can be scaled up and PNB will be transparent in terms of where the money goes and it will be sending reports to those who have donated or “wakaf” their investments. 

The fund would also be channelled nationwide, as agreed by MAIWP, and not just in the Federal Territory, he concluded.