Khazanah at 32: outperformed by a button on your phone

 After thirty-two years, Khazanah Nasional Berhad has produced a handful of wins, a string of disasters, and returns that a Malaysian retiree could have beaten by buying a single American index fund. But all is not lost.

When Khazanah Nasional Berhad was incorporated on Sept 3, 1993 under Dr Mahathir Mohamad’s administration, the pitch was simple. We would have our own Temasek Holdings, a sovereign fund that would compound the rakyat’s wealth for generations.

Thirty-two years on, the gap between that promise and the receipts is uncomfortable.

Let’s start with the wins. Top of the pile is IHH Healthcare Berhad. Khazanah took Singapore-listed Parkway Holdings private in 2010 in a deal valued at around RM8.6 billion, merged it with its hospital assets, and listed the group as IHH in 2012.

In November 2018, it sold a 16% slice of IHH to Japan’s Mitsui and Company for RM8.42 billion and still owns roughly a quarter of one of the world’s largest private hospital groups.

The second win is Alibaba. Khazanah put around RM1.3 billion into the Chinese giant before its 2014 listing and has since reaped over RM4 billion. A four to five times return on a foreign tech bet was the move Khazanah was built for, but it has been the exception.

The third is CIMB Group Holdings Berhad. Khazanah’s stewardship through the Bumiputra-Commerce merger of 2006 helped build a credible Asean-wide banking franchise, and its share price jumped 50.7% in 2024 alone.

Now the losses. Brace yourself.

Malaysia Airlines is the elephant in the hangar. Between 2014 and 2020, Khazanah injected an eye-watering RM28 billion into Malaysia Aviation Group. Roughly RM3.1 billion of impairments in 2018 alone came from the carrier, helping drive a record RM6.27 billion pre-tax loss that year.

In March 2019, then economic affairs minister Azmin Ali publicly blamed past investment decisions, particularly the Malaysia Airlines bailout, for the bulk of those losses.

Themed Attractions Resorts and Hotels Sdn Bhd, Khazanah’s leisure arm, reportedly posted accounting losses exceeding RM1 billion from 2015 to 2019. In February 2025, one of its hotel subsidiaries was wound up by the High Court over an unpaid RM95 million bill.

Iskandar Malaysia Studios is another bruise. The Johor film studio, backed with substantial Khazanah and government funding, was sold to Singapore’s G.H.Y. Culture and Media in 2023 for around RM35 million for an 80% stake. Malaysiakini reported that the operating company had lost roughly 90% of its value, though then deputy finance minister Steven Sim noted that Khazanah retained the underlying physical assets.

Now widen the lens. As of end-2025, Khazanah held net assets of RM105 billion and reported a 5.2% return for the year. According to its own annual review, it has compounded at roughly 5.9% annualised since inception.

That sounds respectable until you look at peers. Singapore’s Temasek Holdings, founded in 1974, posted a net portfolio value of roughly RM1.35 trillion as of March 31, 2025 and has compounded at 14% annualised since inception.

Singapore’s other vehicle, GIC, sits on an estimated RM3.65 trillion on top of that.

Norway’s Government Pension Fund Global – set up in 1990, just three years before Khazanah – is now the world’s largest sovereign wealth fund at roughly RM8.9 trillion. Its lifetime annualised return since 1998 is a modest 6.64%, slightly better than Khazanah’s.

What sets Norway apart is discipline: decades of oil-revenue inflows, no domestic raids, and patient compounding.

On net assets, Khazanah holds under a tenth of Temasek and just over 1% of Norway’s fund. The gap is widening.

Here is the most damning comparison. Over the last thirty years, the S&P 500 in the US has compounded at roughly 10.1% annualised with dividends reinvested. Khazanah’s lifetime return is 5.9%.

A Malaysian retiree who had simply bought and held a basic American index fund in 1994 would have grown her ringgit roughly two-thirds faster than Khazanah managed with its army of analysts and Putrajaya prestige. Our sovereign wealth fund has been comfortably outperformed by doing nothing in New York.

The lesson is brutal but simple. Even modest returns, compounded patiently with disciplined inflows and no political interference, will dwarf flashy headline numbers extracted from a fund repeatedly raided for bailouts.

Khazanah has been called on too often to take large positions in politically sensitive but commercially troubled government-linked companies, from Malaysia Airlines to parts of UEM Group.

Temasek, by contrast, is widely seen as operating at greater arm’s length from Singapore’s Cabinet.

The mass resignation of Khazanah’s entire board in July 2018, after Pakatan Harapan’s election win, showed how closely the fund’s fortunes are tied to political cycles in Putrajaya.

Norway’s fund cannot, by law, invest a single krone inside Norway. That rule, enforced for over three decades, has insulated it from political pressure and forced it to compete in global markets on merit. Khazanah has no such firewall.

Perhaps the most expensive misstep is the one every Malaysian techie still grumbles about. In 2015, Malaysian founders Anthony Tan and Tan Hooi Ling approached Khazanah for around RM39 million for their ride-hailing startup, then known as MyTeksi. Khazanah passed, later explaining to CNBC that it preferred large, mature deals over early-stage start-ups.

Temasek wrote the cheque instead.

Grab Holdings moved its headquarters to Singapore and listed on Nasdaq in 2021 at around RM157 billion. Early-stage startup risk is real, but Temasek’s willingness to take that risk delivered Singapore a national champion that, with a Malaysian cheque, could have been ours.

None of this means Khazanah should be wound up. IHH, Alibaba, and managing director Amirul Feisal Wan Zahir’s focus on energy transition and chip infrastructure suggest a fund remembering its mandate.

But honest accounting matters. Khazanah was set up to be Malaysia’s Temasek. After three decades, it is closer to a middle-of-the-pack performer, humbled by a passive index fund any Malaysian could buy on her phone in five minutes.

The next thirty years can be different. But only if we stop treating our sovereign wealth fund as a national first-aid kit. We can ill afford losing another Grab, having another failure like Iskandar Studios, or another decade of being beaten by a button on a phone. - FMT

The writer can be contacted at kathirgugan@protonmail.com.

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.