Malaysia’s Wealth Fund Bets on Developed Markets in Global Push

Malaysia’s sovereign wealth fund Khazanah Nasional Bhd. plans to increase its exposure to developed markets as the impact of the pandemic has pressured valuations.

“In the depths of the crisis there was some real good opportunities to buy some long-term assets especially in markets that we were underexposed to,” Managing Director Shahril Ridza Ridzuan said in a Bloomberg Television interview with Haslinda Amin on Wednesday.

Malaysia’s Wealth Fund Bets on Developed Markets in Global Push

Khazanah, which holds stakes in the country’s top companies Axiata Group Bhd. and IHH Healthcare Bhd., plans to keep increasing the proportion of its assets invested overseas from less than 20% currently, he said. That won’t happen overnight, he added, as the fund’s current strategy allocation is likely to take five to seven years to put in place.

The fund, which had a net asset value of 73.1 billion ringgit ($17 billion) as of end-2019, saw its profit reach a record last year as it divested from companies including Alibaba Group Holding Ltd. Khazanah swung to 7.36 billion ringgit profit in 2019, from a 6.27 billion ringgit loss the previous year.

The divestments were part of Khazanah’s turnaround plan, which involves the fund separating its portfolio into commercial and strategic investments. Most foreign assets fall under commercial, meaning that the assets are expected to deliver returns of 3 percentage points above Malaysia’s inflation on a five-year rolling basis.

“We don’t expect 2020 to be better than 2019 obviously,” Shahril said. “But we still believe that, from an operations point of view, we’ll still be in the black.”

Khazanah is the sole owner of Malaysia Airlines Bhd. and had weighed a $1.2 billion aid for the troubled flag carrier in June, according to people familiar with the matter. The airline is now working on a full review of its business and operations, after Morgan Stanley was hired last year to explore strategic options for the ailing company.

Airlines in the region are likely to move toward alliances and cooperation amid the industry crisis, Shahril said.

“In life, never say never to anything,” he added, when asked about the potential of a merger between Malaysia Airlines and AirAsia Group Bhd.

©2020 Bloomberg L.P.

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