Malaysia’s $39-billion sovereign wealth fund Khazanah Nasional Bhd on Tuesday announced a refreshed mandate to grow the country’s long-term wealth amidst an ongoing restructuring.
The new mandate will see the sovereign wealth fund classify its assets into separate commercial and strategic funds.
The commercial fund is an intergenerational wealth fund to meet Khazanah’s commercial objective and has a target return of Malaysian Consumer Price Index of plus 3 per cent on a five-year rolling basis. This fund includes public assets such as CIMB Group, Axiata Group, IHH Healthcare and Alibaba.com; and private assets such as The Holstein Milk Company, Sun Life Malaysia, WeLab and Palantir.
Meanwhile, the strategic fund targets a return of 10-year Malaysian Government Securities yield on a five-year rolling basis and measurable economic benefits.
This fund includes strategic assets such as Telekom Malaysia, Tenaga Nasional, Malaysia Airlines, Malaysia Airports and PLUS Malaysia; and developmental assets such as Silterra, Iskandar Investment Berhad, Themed Attractions Resort & Hotels, Pinewood Iskandar Malaysia Studios and Medini Iskandar Malaysia.
“Our performance in 2018 was impacted by several key global and domestic developments in both the economic and social spheres. At the same time, the government initiated a reset of Khazanah, which involved significant changes including a refreshed mandate.
“The organisational restructuring we are currently undertaking will enable us to execute and deliver on our role of growing Malaysia’s long-term wealth, beginning from this year,” said Khazanah managing director Shahril Ridza Ridzuan.
For 2019, Khazanah will focus on executing its portfolio rebalancing strategy and strengthening its financial position.
As of December 31, 2018, Khazanah’s portfolio value as measured by its net worth adjusted (NWA) declined to RM91 billion ($22.3 billion), a 21.6 per cent drop from the previous year. Its realisable asset value also declined to RM136 billion ($33.3 billion) from RM157 billion ($38.5 billion) during the same period. The long-term portfolio performance remained on an upward trajectory, with its NWA achieving an 11.0 per cent return per annum over the last 10 years.
In 2018, Khazanah recorded a loss before tax of RM6.27 billion ($1.54 billion), compared to a profit before tax of RM2.89 billion ($710 million) a year earlier. Profitability was affected due to fewer divestments, reduced dividend income and higher impairments, during a period of transition for Khazanah in an unfavourable market, the SWF said. It declared a dividend of RM1.5 billion ($367 million) for 2018.
Last year was an eventful one for the sovereign wealth fund after the country voted former prime minister Najib Razak’s government out of office. Khazanah has since undergone a major management shakeup to restructure the country’s assets to pare national debt.
One of the large divestments made by Khazanah last year was the sale of its 16 per cent stake in Malaysia-based healthcare group IHH Healthcare Bhd to Japan’s Mitsui & Co. Ltd for $2 billion in cash. The divestment is expected to be completed this quarter.
Some notable investments by Khazanah last year included the acquisition of Prince Court Medical Centre, as well as investments into Ping An Good Doctor and Alibaba’s Ant Financial.