KWAP to allocate more money for foreign deals

KUALA LUMPUR: Retirement Fund Inc (KWAP) aims to lift the overseas portion of its investment portfolio to as much as 15% from 12%, as the US$30 billion pension fund looks to boost performance while domestic returns slow, its chief executive told Reuters.

KWAP will review its asset allocation strategy in the new year, Wan Kamaruzaman Wan Ahmad said at Reuters Global Investment 2018 Outlook Summit. Its current international investments include US ride-hailing firm Uber Technologies Inc, he said.

With RM125 billion (US$29.83 billion) worth of assets under management, a 3 percentage point increase means a shift of US$900 million into foreign deals, a Reuters calculation showed.

The state-linked pension fund received board approval in 2013 to invest up to 19% of assets abroad. But a 23% dive in the ringgit in 2015 saw the government urge funds to repatriate capital and limit foreign exposure.

As domestic investment increased, however, the main share price index continued a decline which began in 2014. The index is up 6% in 2017 but is still one of the region’s worst performers.

Returns on many domestic investments are therefore lower than global investments even though the ringgit is weaker than three years ago, Wan Kamaruzaman said.

“The target is to increase by 7% (to 19%) but we might look at 15 percent which is more realistic,” the executive said, declining to elaborate on regions or sectors of focus.

Investments

KWAP put US$30 million into Uber last year as its first foreign, disruptive-technology investment, and was considering more technology-related deals.

Wan Kamaruzaman said the Uber investment was long-term, and that the fund was waiting for potential investment from Japanese conglomerate SoftBank Group Corp – which has said it is considering investing – to estimate any gains.

“Let’s see the valuations,” Wan Kamaruzaman said.

“If it does (invest), we will know whether our investment is in the money or not.”

KWAP is currently considering participating in a fund that Alibaba Group Holding Ltd aims to raise. The Chinese e-commerce firm plans to invest in regional small businesses in the Digital Free Trade Zone which it launched with Malaysia’s government.

Wan Kamaruzaman said talks were at an early stage.

He also reiterated an end to talks over buying a stake in AMMB Holdings Bhd (AmBank) from Australia and New Zealand Banking Group Ltd, which owns 24%.

“KWAP has always been a financial investor,” he said.

“We don’t want to acquire any controlling stakes in any company. If there’s a smaller (AmBank) stake to be sold, we might consider it, but the bank needs a driver.”

The fund is now in talks to buy stakes in the Malaysian units of Great Eastern Life Assurance Company Ltd and Prudential PLC, as the insurers seek local shareholders to satisfy central bank ownership regulations.

“We have received central bank approval to begin talks and we have started but it is very preliminary,” Wan Kamaruzaman said. -FMT