Malaysian retirement fund Kumpulan Wang Persaraan (KWAP) is looking to increase its allocation into Southeast Asia markets, chief investment officer Hazman Hilmi Sallahuddin told AsianInvestor.
While looking to the neighbouring markets in Southeast Asia, Malaysia’s federal employees’ pension fund has taken a more nuanced approach in the Chinese market.
With an overweight in allocation compared to the benchmark, KWAP has been holding on China, but research on the market is ongoing and further investments might still become relevant.
“Given that we are a long-term investor, I think we cannot ignore China’s recovery in the long run, but perhaps because of the current volatility we should do more in the private side first," Hazman said.
"We are holding onto the public markets, but on the private side we are further exploring what can be done with local and regional GPs (general partners) that have presence in China,” he added.
Hazman elaborated that KWAP is generally being quite defensive on the public equity side globally, as the pension fund is considering a potential recession scenario in 2024.
“We have been rebalancing our portfolio for global equity, and we did some sectors rotation into more defensive sectors like healthcare, IT and consumer discretionary,” he said.
KWAP’s total assets under management was MYR184.5 billion ($38.5 billion) as of July 2023.
SOUTHEAST ASIA GROWTH
The current halt on public investments into China created a bigger investment push into Southeast Asia with its emerging market economies.
A big part of the drive is happening in private equity. In 2022, KWAP notched 16 private equity transactions. This year, the pension fund is on track to do more than 30 in PE alone, an admittedly aggressive private markets investment program, the CIO said.
In July, for instance, the pension fund participated in a Series D funding round in the Indonesian aquaculture company eFishery, which aims to expand the country’s aquaculture farming community and increase fish feed and fresh fish transactions on its platform.
The $200 million round was led by Abu Dhabi-headquartered technology investment manager 42X. Among the other investors areSingapore’s Temasek, who were also among the existing investors from previous funding rounds, according to an eFishery announcement on July 7.
“The eFishery investment is something we are quite proud of because it demonstrated our ability to gain access to great opportunity and co-invest with other like-minded investors,” Hazman said.
During a revamp of its strategic asset allocation (SAA) in November 2022, KWAP’s cap on overseas assets was raised from 20% to 30% of the total portfolio.
As a part of its SAA revamp, KWAP is also looking to soon add private credit investments to its portfolio holdings, as it pushes further into private markets. The portfolio target balance between public and private assets was changed from 90/10 to 80/20 last year, and approval was given to start the process of investment in private credit as a new sub-asset class.
AsianInvestor will be hosting its 13th flagship Southeast Asia Institutional Investment Forum in Singapore on November 22. For more details, click here.
The headline on this story has been changed. Para 1 and para 2 have also been updated.