Malaysia's Khazanah restructures fund in two groups, posts weak 2018 results

[KUALA LUMPUR] Malaysian sovereign wealth fund Khazanah Nasional Bhd unveiled a new investment strategy that classifies its portfolio into a commercial and a strategic fund, even as it reported weak results for last year.

The restructuring comes at a time when Malaysian Prime Minister Mahathir Mohamad is looking to raise money for government coffers, depleted by a fiscal deficit and a massive debt from a multi-billion-dollar scandal at state investment fund 1Malaysia Development Bhd (1MDB).

"Our performance in 2018 was affected by several key global and domestic developments," Khazanah managing director Shahril Ridza Ridzuan, who took charge of the fund in August, told reporters on Tuesday.

"At the same time, the government initiated a reset of Khazanah, which involved significant changes including a refreshed mandate," he said.

Reuters reported last month, citing sources, on Khazanah's plan for a new investment playbook aimed at delivering more cash to the government by pruning its stakes in non-strategic assets.

According to the report, Khazanah, traditionally more of a strategic investor, had split its investments in over 100 firms spanning more than 20 countries under the two new categories.

Khazanah said on Tuesday that its investments in companies including 27 per cent-owned CIMB Group Holdings, 36-per cent owned telecommunications firm Axiata Group and Alibaba would be part of its commercial fund.

The commercial fund will target a return equivalent to Malaysia's Consumer Price Index plus 3 per cent on a five-year rolling basis.

Firms such as state utility Tenaga Nasional, struggling Malaysia Airlines - which Khazanah took over four years ago - Malaysia Airports Holdings and Telekom Malaysia will be part of Khazanah's strategic fund.

Khazanah said the realisable asset value of its portfolio value fell to 136 billion ringgit ($33.4 billion) in 2018 from 157 billion ringgit in the previous year.

It swung to a loss before tax of 6.27 billion ringgit in 2018 from a profit before tax of 2.89 billion in 2017, hit by fewer divestments, higher impairments and lower dividend income. (US$1 = 4.0750 ringgit)

REUTERS