Improving national fund manager’s future

THERE is great interest in how Tan Sri Zeti Akhtar Aziz will perform as the chairman of Permodalan Nasional Bhd (PNB). Any doubts from the public engagement perspective, however, were soon cast aside as the ease and confidence of her message was second nature for a person once named the world’s best central banker.

For all her experience and accolades, her role as the chairman of PNB marks a shift from being a career regulator to one who is now in charge of answering to a different set of stakeholders. Zeti spoke with a group of editors prior to her maiden press conference with the media and provided some written answers to further queries. The following are excerpts of what she said.

What do you hope to bring to PNB from your experience at Bank Negara and how will that help with returns to members?

PNB is a well-established and professional institution with a strong foundation and a clear strategic mandate to generate wealth for its unit holders. Looking ahead, our focus must be on reinforcing our inherent strengths and addressing weaknesses and gaps in order to tap on new avenues of growth.

At the central bank, during my term in office as governor, we undertook an organisational transformation three times. We were very ambitious to be at the frontier of central banking.

I would like to be equally ambitious here to achieve this higher level of performance through greater organisational capability and competence.

For PNB, the Strategic Plan 20172022 is almost midway and I would like our review of the plan to focus on three areas for improvement:

> Refining the framework for asset allocation – Diversification among the different asset classes and diversification to international investments, which should not be limited to only developed markets but to seek opportunities in emerging markets.

> Enhancing risk management – Creating a robust framework to ensure resilience to economic cycles and financial shocks. Part of this is to strengthen liquidity management while also building buffers during the good times.

> Enhancing organisational capabilities – Strengthening from within and building internal expertise.

With a strong base and a clearer framework for these three areas, I am confident that PNB will be able to operate more effectively and efficiently while generating sustainable returns for unit holders.

PNB is a large influencer in the property market. How will the group and its companies change the offerings and direction of the property market?

There is certainly tremendous potential to be tapped in the property sector, particularly in sub-segments which have not experienced an oversupply. However, in terms of changing direction, this will take time. We will need to comprehensively review any changes that we aim to make, be it in the property sector or any other sector.

We must weigh the risk factors and how it will impact the wider sector. We would not want to make drastic changes which would affect the market. What is important is that we review opportunities and shift towards the frontiers of property development and meet the areas in which there is demand. This includes affordable housing.

You spoke about sustainability in returns. What will this mean for members in terms of their returns and the asset allocation by the fund?

The five initiatives under the first pillar of PNB’s Strategic Plan 2017– 2022 are entirely about enhancing sustainable returns. PNB has continued to build on the strategic plan momentum and we have seen encouraging progress in these initiatives this year.

Our initiative to optimise asset allocation continues with the judicious deployment of cash and with global investments.

At the same time, PNB will continue to actively pursue value-creation opportunities in all of its other initiatives such as the transformation of our strategic companies to boost domestic public equity performance, diversification into global assets, increasing exposure in private equity and fixed income, and rationalising and enhancing PNB’s property investments.

How do you see the challenges in the fund-management business with changing investment decisions, especially by the younger generation?

The landscape is highly dynamic and ever changing, and we need to be responsive and agile in ensuring that our products are relevant and well accepted. Especially with the launch of the new ASNB variable price funds, ASN Equity 5 and ASN Sara 2, we are offering additional options to meet the differentiated investors’ needs at the various stages of their life cycle.

Can you elaborate further on your plan to rejuvenate your property development and invest- ment both for PNB properties and your investee companies?

While we are aware that there is an oversupply in some categories, there are new segments and frontiers in the property industry for us to explore. Gradualism is our approach to this. We aim to build up capabilities first before venturing forward.

For the time being, PNB has made headways in rebalancing its real estate portfolio. Let me clarify that for PNB, we will focus more on becoming a property investor, where property is one of the asset classes for us to invest in and we have exited from property development with the disposal of I&P Group Sdn Bhd in 2017.

This year, we have completed the sale of 90 High Holborn and also secured WeWork to occupy one of our London properties, Aviation House, where WeWork’s presence is part of the rejuvenation plan for the building.

Our flagship landbanking company, PNB Development Sdn Bhd, also completed a number of deals that include the sale of Kota Seri Langat land to AREA and the purchase and leaseback of Media Prima commercial properties.

When you came into office in July and after having various meetings at PNB, how can you describe PNB’s work and what was your impression of the firm when you came in?

My first impression of PNB was that it was a very professional organisation that had a very focused mandate and that mandate was wealth creation for its unit holders. There is great clarity on what we need to do. I find that the level of professionalism is very high. There are people who are new that have been brought in with high-powered backgrounds, and there are highly experienced members that have been with the organisation for two to three decades. They have good institutional memory and remain as great potential to lift the organisation to a higher level of organisational capability to perform better.

The first thing you assess in an organisation is the strategic focus. It is easy at PNB because of its mandate but it was more complicated with the many mandates at the central bank.

The next thing is having a performance-based organisation. Everybody has to deliver. Every year, the board at Bank Negara will assess my performance.

I come from a regulatory and policy-making background. Managing reserves was one of my portfolios when I was an assistant governor with the central bank. The areas where we achieved great advancement at the central bank include the framework for asset allocation and investment and diversification to generate better returns.

Most importantly is the area of risk management at the bank. Most of the people at the bank would have great pride, as we probably have one of the most advanced risk-management frameworks in place.

In terms of liquidity management, PNB has been conservative by holding a very high proportion of cash. While it is good to be conservative, it is also good to have the instruments and the mechanism to