PNB aims to reduce cash holding
KUALA LUMPUR: The country’s largest state-owned fund manager is looking to hold less cash even as it struggles to make acquisitions that would generate attractive returns.
A fifth of Permodalan Nasional Bhd’s (PNB) RM266 billion of assets under management (AUM) is in cash and money markets, and chairman Tan Sri Abdul Wahid Omar said in an interview the fund could reduce such holdings by at least five percentage points.
That would free up about RM13.3 billion, according to Bloomberg calculations.
“While we need to maintain a certain level of cash, it doesn’t have to be 20 per cent,” said Wahid, a former minister who joined PNB a year ago.
“We can easily go down to 15 per cent and below.”
Still, the ringgit is among factors holding PNB back from being more aggressive with acquisitions.
The currency remained “relatively weak”, said Wahid recently, declining to specify what he thought was a fairer value for the exchange rate.
“The last thing you want is that you invest in a US dollar asset at 4.30 and within a year, the ringgit strengthens, by say, five per cent.”
That would render returns lower when earnings were converted back to the local currency and PNB was “mindful of that kind of situation”, he said.
Set up by the government in 1978, PNB remains heavily invested in Malaysia, home to 98 per cent of its assets.
The fund had not raised its offshore holdings also in part because of a lack of attractive investments, said Wahid.
“At the right time, at the right opportunity, then we will make those investments,” he said.
Even then, PNB was not likely to hold more than 10 per cent of its assets overseas because its liabilities were in ringgit, he said.
“It is very important for us to continue to invest mainly in Malaysia, not only from the assetliability perspective, but also from the economic multiplier perspective.”
About 69 per cent of PNB’s money is invested in equities. The fund may shift some of its cash into fixed income, private equity and property — segments which currently make up just over a 10th of holdings.
The fund wanted to boost its AUM to RM350 billion by 2022, said Wahid.
PNB owns stakes in some of the nation’s biggest companies including Malayan Banking Bhd, Sime Darby Bhd and UMW Holdings Bhd.
Its domestic equity investments of RM180 billion is equivalent to about 10 per cent of Bursa Malaysia’s market capitalisation.
It was also constructing what would be Malaysia’s highest tower (Merdeka PNB118), with a completion date by the end of 2020, said Wahid.
He said PNB was targeting an initial public offering of its infrastructure unit, Projek Lintasan Kota Holdings Sdn Bhd, in 2019.
Another possibility was the listing of its real estate investment trust, though there was no definite plan to do so right now, he added. Bloomberg