Khazanah says investments did not underperform

PETALING JAYA: Khazanah Nasional Bhd has refuted a news report which claimed it had been underperforming over the past four years.

The sovereign wealth fund said in a statement that the article had selectively focused on a “narrow and incomplete set of indicators of financial performance”.

The news report “Khazanah feels the heat amid push to change its investment strategy”, published by The Straits Times of Singapore yesterday had stated that Khazanah was under pressure to generate higher returns.

It said Khazanah had returned an average of RM825mil in dividends annually over the past four years from its RM145bil worth of assets, which translates to less than 1% returns a year between 2013 and 2016.

The article also alleged that senior government officers were pushing for changes to the fund’s management and investment strategy.

In the statement, Khazanah said the most representative measure of its financial performance was its total returns, which take into account realised and unrealised returns, as well as the distribution of returns through dividends.

In Khazanah’s case, it said, total returns were represented by the growth in the net value of its portfolio or net worth adjusted (NWA) value.

It said the NWA value of the portfolio had grown 3.1x or 207% from RM33.3bil to RM102.1bil between May 2004 and December 2016, which is the period since the start of the revamp of Khazanah and government-linked companies.

This, it said, translated into an annual compounded return of 9.3% per annum over the 13-year period, rather than just the 1% or 2.6% returns as implied by the report.

“Khazanah has a multi-pronged mandate that includes investing for

growth and commercial returns – domestically and internationally – while also undertaking developmental and national initiatives. The latter includes the development of regional economic corridors, reforms of the education sector and the restructuring and catalysing of various economic sectors and national companies.

“The range of returns of these initiatives vary widely from low or even negative returns for more developmental activities, to significantly higher returns for our commercial and international operations, averaging at the said 9.3% per annum NWA return,” it said.

The fund added that as its mandate did not involve receiving regular capital injections, and its need to reinvest for growth and national initiatives, the bulk of its returns were primarily channeled into reinvestments rather than to dividends.

“This need for a balanced re-in- vestment strategy for growth, development and dividends is done in consultation and approval of the board of directors and the government,” it said.

The fund added that Khazanah’s audited shareholders funds had grown to RM37.8bil as at Dec 31, 2016 from RM13.2bil as at Dec 31, 2004, an increase of RM24.6bil over the period.

“We hope the above clarifies the conclusions of the articles in respect of Khazanah’s financial and non-fi- nancial performance,” it said.

The fund said the news article had given “an inaccurate and ultimately misleading picture” of Khazanah’s financial performance.

“Finally, with regard to Khazanah’s leadership succession as referred to in the articles, we wish to reiterate that Khazanah has a well-established and orderly succession process, approved by our Board of Directors that is in line with good institutional practice,” it said.