Malaysia’s sovereign wealth fund seeks better portfolio resilience in risky markets

Malaysian sovereign wealth fund Khazanah Nasional is rebalancing its investment portfolio to make it more resilient to market volatility, according to its chief executive.

Khazanah’s net asset value fell 5% year-on-year to 81 billion ringgit ($17.4 billion) in 2022, reflecting downtrends in the global market, the fund said in March. The Kuala Lumpur-based fund invests more than half of its portfolio in public markets.

“Our focus here is to look at how we can be a little more resilient in the market,” Khazanah chief executive Amirul Feisal Wan Zahir told CNBC Monday on the sidelines of the Energy Asia conference in Kuala Lumpur.

“Given the volatility in the market, we are still in the process of rebalancing our portfolio,” he added.

Malaysian sovereign wealth fund Khazanah Nasional is strengthening its investment portfolio to be more resilient in volatile markets, according to its chief executive, Amirul Feisal Wan Zahir.

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Khazanah posted net income of 1.6 billion ringgit ($343 million) in 2022 — more than double its net income year-on-year and its fourth straight annual profit after an unprecedented slump in 2018.

In comparison, the MSCI World Index plunged more than 18% in 2022, and the MSCI Emerging Markets Index plunged 20% over the same period.

At the end of 2022, Khazanah said that 55.9% of its portfolio was invested in Malaysian public markets and 13.4% in overseas public markets. Almost a quarter of its portfolio was invested in private markets, more than half outside of Malaysia, with 8% invested in real assets.

“The use of assets actually offers great potential,” said Wan Zahir, pointing to investment opportunities in a volatile market environment.

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“In this current moment when you look at industry consolidation…or we know there’s a rising interest rate environment and companies are going to be under pressure – especially if you look at consumer companies or companies that are heavily indebted,” he said.

Inflation rates have remained persistently high around the world, despite multiple rate hikes, as central banks attempt to rein in years of super-loose monetary policy following the 2008-2009 financial crisis. Rate hikes and rising yields have hurt many companies.

“But it’s saying to CEOs and companies: How can I actually lower my costs?” said Wan Zahir.

“So if you look at areas like business services, that’s where you could see opportunities in private equity as well.”

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