Malaysia’s largest fund manager Permodalan Nasional Bhd (PNB) plans to increase its global exposure to 30 per cent in 2022 from 8.5 per cent as of end-2019, as it looks to optimise overall risk-adjusted returns in a persistently low-yielding environment, its chief executive said.
“Not only will we be diversifying asset classes, but also sub-classes underneath to capture specific sectors and geographies. The aim is to have various investment styles that can weather through different market conditions rather than to employ a single strategy. This will see us increasing our global exposure to 30%, within three years,” Jalil Rasheed said in a virtual media briefing in conjunction with the release of its annual report 2019.
“In an effort to deploy quicker, we will also engage external fund managers who are world leaders in their specific areas to manage on our behalf,” he said.
Jalil, however, noted that the risk that could delay its deployment target is currency, where the fund’s receipts are in ringgit. Thus, any deployment will be made carefully taking into account the strength or weakness of the ringgit.
“As fund managers, we see opportunities in markets as valuation are currently depressed. But what will determine our overseas deployment is the strength or weakness of our Malaysian ringgit,” he said.
The 30 per cent global exposure target is part of the diversification strategy of its 3-year strategic plan unveiled at the briefing. The so-called Focus 4 strategic plan, which emphasises on diversification, value creation, risk management and organisation transformation, is formulated based on the outcomes of the mid-term review conducted in 2019 of the earlier Strategic Plan 2017-2022. The plan also comes as the fund sees lower net income and return on assets amid uncertainties in global markets brought by the Covid-19 outbreak.
“Focus 4 which hones in on specific high-impact areas that are more attuned to the market environment. Adopting a shorter-term three-year approach also provides PNB with the flexibility to be more responsive and adaptable to harness opportunities against the fast-paced backdrop of current times,” Jalil said.
PNB will also continue to accelerate portfolio diversification via investments into new asset classes and geographies, including global real estate opportunities with attractive yields.
The fund saw its asset under management (AUM) increase by 4.5 per cent to RM312.0 billion ($72.3 billion) in 2019. Its net income fell 37.1 per cent to RM10.7 billion from RM17.0 billion a year ago, its latest annual report showed. Meanwhile, its gross income in the said period fell 25.6 per cent year-on-year to RM15.1 billion. Return on assets stood at 3.5 per cent in 2019, as compared to 6 per cent in 2018. Its international exposure has been increased to 8.5 per cent, from 3.5 per cent in 2018.