Malaysia's sovereign wealth fund rebalances portfolio to boost resilience in volatile markets

Khazanah Nasional, the managing director of Malaysia’s sovereign wealth fund, said the fund is rebalancing its portfolio to build resilience against market volatility.

Hit by a downturn in global markets, Khazanah’s net asset value will fall 5% in 2022 from a year ago to 81 billion ringgit ($17.4 billion), the fund said March said. The Kuala Lumpur-based fund invests more than half of its portfolio in the public market.

“Our focus is on looking at how we can be more resilient in the market,” Khazanah managing director Amirul Feisal Wan Zahir told CNBC on the sidelines of the Asia Energy Conference in Kuala Lumpur on Monday.

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

Khazanah posted a net profit of 1.6 billion ringgit ($343 million) in 2022, more than doubling from the previous year and posting its fourth straight annual net profit after an unprecedented slump in 2018.

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

Amirul Feisal Wan Zahir, managing director of Malaysian sovereign wealth fund Khazanah Nasional, said the fund is strengthening its portfolio to enhance its exposure to volatile markets. resilience.

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By the end of 2022, Khazanah says 55.9% of its investment portfolio is invested in public markets in Malaysia and 13.4% is invested in public markets overseas. Nearly a quarter of its portfolio is invested in the private market, with more than half invested in markets outside Malaysia, with 8% invested in real assets.

“Asset allocation actually has a lot of potential,” said Amirul Feisal, pointing to investment opportunities in a volatile market environment.

“At this moment, when you think about industrial consolidation … or we know there is an environment of rising interest rates, businesses will be squeezed — especially when you think about consumers or highly leveraged companies,” he said.

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While central banks sought to rein in years of ultra-loose monetary policy following the 2008-2009 financial crisis, global inflation has persisted despite multiple rate hikes. The combination of rising interest rates and rising yields has hurt many companies.

“But it does tell the CEO and the business — how can I really reduce costs?” Amiru Faisal said.

“So when you look at areas like business services, you can also have opportunities in private equity.”

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