Introduction

According to its managing director, Malaysia’s sovereign wealth fund Khazanah Nasional is rebalancing its investment portfolio to increase its resilience against market volatility.

Net Asset Value Decline

Khazanah’s net asset value declined 5% to 81 billion ringgit ($17.4 billion) in 2022 from a year ago due to global market downtrends. The Kuala Lumpur-based fund invests more than half of its portfolio in public markets.

Rebalancing Portfolio

Khazanah’s managing director, Amirul Feisal Wan Zahir, said, “What we are focused on doing here is to look at how we can be a bit more resilient in the market. Looking at the volatility in the market, we are still in the process of rebalancing our portfolio.”

Net Profit Increase

Khazanah posted a 1.6 billion ringgit ($343 million) net profit in 2022, more than double its net profit from the previous year, and a fourth-straight annual net profit after an unprecedented plunge in 2018. In comparison, the MSCI World index saw a more than 18% slump in 2022, and the MSCI Emerging Markets index dived 20% in the same period.

Portfolio Composition

As of end-2022, Khazanah said 55.9% of its portfolio was invested in public markets in Malaysia, with 13.4% invested in public markets overseas. Nearly a quarter of its portfolio was invested in private markets, more than half outside Malaysia, with 8% invested in real assets.

Investment Opportunities

Wan Zahir said, “There is actually a lot of potential in deploying assets,” pointing towards investment opportunities in a volatile market environment. “In this current moment, when you look at industrial consolidation … or we know there is a rising rate environment, and corporates will get squeezed — especially when you look at consumer or highly leveraged companies,” he said.

Inflation Rates and Rising Yields

Inflation rates have stayed persistently high globally despite multiple interest rate hikes as central banks seek to rein in years of super-easy monetary policy following the 2008-2009 financial crisis. Rate hikes and rising yields have combined to hurt many companies.

Reducing Costs

Wan Zahir said, “But it does tell CEOs and corporates — how can I actually reduce my costs? So when you look at areas such as business services, you could get opportunities in the private equity space there as well.”

Conclusion

Khazanah is rebalancing its investment portfolio to increase its resilience against market volatility. With investment opportunities in a volatile market environment, the managing director is optimistic about deploying assets and reducing costs.