Permodalan Nasional Bhd (PNB) is preparing a strategy that will broaden its ambitions to become a global fund that invests in various asset classes ranging from fixed income and equities to private equity, commercial and residential assets.
PNB is the largest fund management company in the country with RM 338 billion in assets under management (AUM). It has expanded its investments in areas such as logistics and data centers.
In the past, PNB was known for its “over-focused” investments primarily in the local stock market, and the fund only began to diversify overseas in 2018.
To date, its overseas investments constitute 16% of its portfolio, while the remaining 84% is invested in the local market.
In 2017, it had invested only 2% of its funds abroad, of which 98% in the local capital market, in particular the stock market.
Group Chairman and CEO Ahmad Zulqarnain Onn said PNB’s international assets contributed a much larger contribution to the fund’s return of 30% in 2021, compared to 24.2% last year.
“The better performance of our investments in global equities has succeeded in cushioning the impact of the difficult domestic market.
“This illustrates the importance of a well-diversified portfolio for managing portfolio risks and generating sustainable returns,” he said after the virtual announcement of Amanah Saham Bumiputera’s (ASB) 2021 dividend on Thursday. Diversification boosted the performance of PNB.
PNB reported 5.6% growth of its assets under management to RM 338 billion in 2021 from RM 320.4 billion last year. The fund reported five sen dividend income of RM 8.9 billion for its flagship fund ASB for fiscal year 2021.
This contrasts with the local stock market’s main FBM KLCI, which is the region’s worst performing index this year, down more than 7% since the start of the year.
The dividend includes an income distribution of 4.25 sen per unit and a bonus of 0.75 sen per unit.
Last year, PNB declared a dividend of 4.25 sen per unit for ASB unitholders due to market weakness caused by uncertainties related to the Covid-19 pandemic.
PNB said the income distribution would benefit 10.4 million ASB unitholders.
This brings the total cumulative income distribution and bonuses of the fund to RM 168.5 billion since its inception in 1990.
Ahmad Zulqarnain points out that his local investments made a positive contribution to the fund’s return despite the poor performance of the index.
He says that GNP’s “strategic investment companies” in Malaysia declared RM 5 billion in total dividends, 35% more than the RM 3.8 billion reported in 2020.
“One of the main contributors to growth comes from our investment in the banking sector,” he adds.
The strategic companies for PNB are Malayan Banking Bhd, Sime Darby Bhd, Sime Darby Plantations, Sime Darby Property Bhd, SP Setia Bhd, Duopharma Biotech Bhd, UMW Holdings Bhd, Velesto Energy Bhd and MNRB Holdings Bhd.
It should be noted that PNB has participated in several major corporate exercises in recent years which aimed to restructure some of its strategic companies and improve their corporate governance.
This includes the exercise of splitting Sime Darby Bhd into three separate listed companies, UMW Holdings Bhd from UMW Oil & Gas Corp Bhd, and the decoupling of Chemical Company of Malaysia Bhd (CCM) and CCM Duopharma Biotech Bhd.
There was also a major acquisition of I&P Bhd by SP Setia Bhd to create one of the largest real estate companies in the country.
Ahmad Zulqarnain stresses that despite the fund’s efforts to diversify into foreign markets, investing in domestic capital markets remains a priority for PNB and that it will continue to seek investment opportunities here.
The national capital market represents 68% of its investment portfolio.
“We are not straying from Malaysia. We will continue to deploy capital in Malaysian companies through initial public offerings, sukuk subscriptions, real estate investments and private companies.
“For us, it’s about building the right ‘all-weather’ portfolio with the right asset allocation to generate the necessary sustainable returns,” he adds.
Ahmad Zulqarnain said that PNB will focus on highlighting environmental, social and governance factors in its investment activities.
He says the fund plans to launch its “sustainability framework” by the first quarter of next year.
“We have defined our sustainable development aspirations through three pillars.
“With regard to the environment, the focus will be on the transition of PNB and its portfolio companies towards reducing greenhouse gas emissions and achieving the net zero carbon emission of the Malaysia by 2050.
“In social and governance matters, we will make commitments to improve good governance practices that we believe are appropriate for this market, as well as to reduce inequalities and improve diversity,” he said.
Since his appointment in July last year, Ahmad Zulqarnain, from Khazanah Nasional Bhd, has developed the fund’s sustainability roadmap.
He succeeded Jalil Rasheed, who left his post after nine months on the job.
“With the organizational transformation initiatives implemented during the year, PNB is now more agile and well equipped to realize greater potential in the future”, quipped Ahmad Zulqarnain.
When asked if PNB plans to invest more in Sapura Energy If the oil and gas company plans a cash appeal, Ahmad Zulqarnain said “we will assess it like any other investment.”
PNB became the largest shareholder of Sapura Energy in difficulty in 2018 after taking the rights shares not subscribed in the company’s cash call and then, with an investment from RM4bil, bringing its stake to 40% against 12.6 %.
Sapura Energy shares are currently trading at an all-time low of 4.5 sen per share.
Sapura Energy, which is currently facing cash flow problems and a debt level of RM 10 billion, would clearly put PNB in a difficult position if there was a further call for cash.