November 16, 2017 / 5:58 AM / in a month

Top Malaysia fund firm eyes more private investments to cut cash pile

KUALA LUMPUR (Reuters) - Malaysia’s largest fund management firm Permodalan Nasional Bhd (PNB) plans to boost private investments and fixed income assets starting next year as part of a five-year target to reduce its cash holdings, its top executive said.

Abdul Wahid Omar, group chairman of Malaysia's Permodalan Nasional Bhd, speaks at his office in Kuala Lumpur November 15, 2017. REUTERS/Liz Lee

State-linked PNB, with 271 billion ringgit ($64.88 billion) in assets under management as at end-September, intends to reduce its cash holdings to 12 percent by 2022 from the current 18.5 percent.

With PNB’s stated goal to grow its assets to 350 billion ringgit by 2022, that would mean it will need to find investment deals for an extra 23 billion ringgit.

“The main beneficiary would be private investments, then fixed income followed by property, in that order,” PNB group chairman Abdul Wahid Omar said at the Reuters Global Investment 2018 Outlook Summit.

“In the case of private investments, it takes time because we need to identify unlisted investments and private equity funds for us to allocate,” he said, adding that there would be more of such investments in the coming year, without elaborating.

Abdul Wahid took the top job at PNB in August last year after a stint in the office of Malaysian Prime Minister Najib Razak. In 2015, he was tasked with navigating the Malaysian economy which was battered by a slump in global oil prices and other economic uncertainties.

PNB expanded its infrastructure portfolio in January with the 380 million ringgit acquisition of toll concession asset Sistem Lingkaran-Lebuhraya Kajang Sdn Bhd, through its unit Projek Lintasan Kota Holdings Sdn Bhd (Prolintas). The fund is undertaking an internal restructuring to list Prolintas next year.

PNB’s fixed income assets accounted for 5.3 percent of its total portfolio as of end-August, up from 3.8 percent a year ago. Private investments accounted for 2.8 percent and real estate for 3.3 percent as of end-August.

But PNB’s primary asset class is public equity, with 69 percent invested. It is a strategic investor in the biggest companies in Malaysia, including the largest lender by assets Malayan Banking Bhd (MBBM.KL) and conglomerate Sime Darby Bhd (SIME.KL).

PNB is spearheading the demerger of Sime Darby into three separate businesses by the end of this month, to unlock value.

“That’s why we see an improvement in share value, there is already a 20 percent uplifting of value,” Abdul Wahid said.

INTERNATIONAL EXPOSURE

    PNB, which has 98 percent of its assets parked in Malaysia, is now looking to increase its international exposure in 2018.

    “We are continuing with the efforts to optimize our asset allocation and one of them involves also looking at balancing our international portfolio,” Abdul Wahid said.

    “It depends on to what extent the ringgit, we believe, will strengthen against the US dollar.”

    When he took the helm at PNB in August last year, the weak ringgit MYR= hampered appetite for global assets.

    “Ringgit has since strengthened to the 4.18 level currently so we are again looking at the opportunities...,” he said.

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    Reporting by Liz Lee; Editing by Muralikumar Anantharaman

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