KUALA LUMPUR: Khazanah Nasional Bhd seems to be stuck with "past priorities" and "out-of-date" assets of the old economy that have passed their prime, according to an economist.
Hence, the country's sovereign wealth fund should review its portfolio and privatise some "out-of-date" assets to raise money for reinvestment in key areas, said Dr Geoffrey Williams of Malaysia University of Science and Technology.
He said Khazanah could redefine its purpose from a development fund to a pension fund and take on other underperforming public funds to create a new Malaysian superfund to plug the pensions gap.
"In other countries, a sovereign wealth fund is a pension fund with this exact aim. Combine the underperforming (public) funds with Khazanah — it will be (a Malaysian superfund with) more than RM500 billion," he said on Khazanah's subdued performance over the years.
Williams has been calling for a merger of government social security schemes, pension bodies and unclaimed assets to form a "superfund" to provide retirees at the bottom of the income heap with a monthly pension of about RM2,000 each.
This would include Social Security Organisation (Perkeso), Retirement Fund Inc (KWAP), the armed forces pension fund (LTAT), the national trust fund (KWAN) and unclaimed assets of deceased people.
Williams said Khazanah had in the past achieved its long-term aims of boosting growth in key sectors and firms, and adding social value.
But it had somehow become committed to a long-term strategy based on past priorities rather than a long-term strategy based on future priorities.
"These priorities are set by the (previous) government. Now we have a new government and it may be useful to reassess these priorities," he remarked.
Khazanah's fund size, he noted, is not actually that big at a realisable asset value of RM127 billion as at the end of 2021 compared to the Employees Provident Fund, for example, at more than RM1 trillion.
"So the priorities are important to get the best socioeconomic outcomes. If you look at its investment portfolio, it is highly invested in old-economy companies which have probably passed their prime.
"At the same time, it is invested in key social companies in healthcare and energy which can offer growth and social impact. Khazanah must relook its portfolio and use responsible privatisation methods to realise some out-of-date assets and raise money for reinvestment in key areas," Williams said.
Another economist, Putra Business School associate professor Dr Ahmed Razman Abdul Latiff, has a different view.
He said there should not be drastic changes to its strategy for now.
"Khazanah is still in recovery phase. Therefore, there should not be any dramatic changes to its investment and asset management strategy, at least until the global economic situation has improved," he said yesterday.
When contacted, a Finance Ministry spokesperson said it was cognisant of the different roles of government-linked investment companies (GLICs) within the Malaysian context.
"GLICs need to focus on their core business and not overlap, bound by different risk parameters and liquidity considerations.
"For example, contribution pension fund like EPF and benefit pension fund like KWAP cannot take on the long-term investment horizon and domestic catalyst role that Khazanah undertakes.
"As such, Khazanah should remain focused as the government's strategic investment arm."
The spokesperson added that Khazanah should also continue to focus on catalysing new growth areas in addition to crowding-in private sector investments domestically.
Khazanah was launched in 1994 to consolidate privatised national assets such as the airline, energy, telecommunications and railways.
In 2019, it split its portfolio into a commercial fund (focused on commercial gains) and a strategic fund (dedicated to driving economic growth by investing in domestic companies). But at its annual review in March 2022, Khazanah consolidated the two funds into a single diversified portfolio with a realisable asset value of about RM124.8 billion, as part of its new "Advancing Malaysia" strategy.
Khazanah's overall portfolio consists of four portfolios. They are the investment portfolio, the Dana Impak portfolio (with a RM6 billion allocation), developmental assets and special situation assets with distinct return expectations and priorities.
An unidentified former senior Khazanah official reportedly said the consolidation had more optics than substance and that he did not expect a significant impact on its performance due to legacy issues.
Meanwhile, Williams said Khazanah is a development fund focused on long-term socioeconomic development rather than a financial fund focused on short-term returns.
"It also has a mandate to catalyse new growth areas, strengthen Malaysia's economic competitiveness and contribute to priority socioeconomic outcomes.
"Now it has to adopt a new environmental, social and governance strategy too. All of these are very challenging," he added.
Khazanah announced last week that its profit from operations had risen to RM1.6 billion in the year ended Dec 31, 2022 from RM670 million in 2021.
But this was much lower than the RM2.9 billion profit posted in 2020, which was a 61 per cent slump from the preceding year.