Malaysia’s KWAP is bullish on home market opportunities
Malaysia’s federal employees’ pension fund, Kumpulan Wang Persaraan (KWAP), is quite bullish on its domestic market due to positive macroeconomic sentiments.
At the same time, co-investments with other Malaysian asset owners widen the field in the search for attractive assets, Hazman Hilmi Sallahuddin, chief investment officer at KWAP, told AsianInvestor.
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.
That still leaves 70% of allocations for the Malaysian market where the CIO currently sees constructive signs that make him positive about the macroeconomic framework.
After a general election in November 2022, followed by state elections in August 2023, the current government has released policies with regards to energy and industry, among other policy areas.
In addition to the National Energy Transition Roadmap and the New Industrial Master Plan 2030, the government unveiled its 2024 national budget, the largest in Malaysia's history with an allocation of RM393.8 billion ($84.1 billion).
So while talks about recession in developed economies and a sluggish Chinese economy persist as 2023 draws to a close, KWAP is making plans to reap the benefits of knowledge about its home market’s development.
“The outlook for Malaysia is very positive. If you talk about recession in the developed markets and the potential for some of the capital shifting here into ASEAN, and with all these programs and incentives in place, we are quite bullish on Malaysia,” Hazman said.
ASSET OWNER COLLABORATIONS
On October 30, KWAP and two other government-linked investors, Permodalan Nasional Berhad (PNB) and the Employees Provident Fund (EPF), announced a sale-and-leaseback transaction, agreeing to buy a domestic high-tech industrial production facility.
The three entities will buy the industrial asset, Kulim II, valued at RM2 billion, from OSRAM Opto Semiconductors, a wholly owned domestic subsidiary of Austria-based OSRAM.
The sale-and-leaseback transaction is expected to conclude in December 2023. The three institutional investors will each own 33.3% equally. The investment is for a 10-year period with an exit strategy.
“We have seen more of similar domestic co-investment opportunities in the works in the coming 12 months. We believe that can spur the domestic market,” Hazman said.
Meanwhile KWAP has also been happy to go on a domestic shopping spree on its own. On December 4, Singapore rental housing developer and manager Centurion Corporation announced it sold two worker dormitories in Malaysia to KWAP for RM227 million.
The purpose-built worker accommodation facilities are in Johor and Penang representing a total of 9,111 beds. The deal stipulates that the Singapore-listed firm will lease the properties from KWAP for a period of 15 years.
KWAP’s total assets under management was RM184.5 billion as of July 2023.
BOOSTING VC, PE
The November 2022 strategy revamp also brought the portfolio target balance between public and private assets to 80/20 from 90/10, and approval was given to start the process of investing in private credit as a new sub-asset class.
ALSO READ: Malaysia's KWAP looks to private credit after private equity boost
This realignment is also showing in KWAP’s domestic investments.
In September, KWAP launched a venture capital vehicle Dana Perintis – which means “Pioneer Fund” – aimed at boosting both the domestic and regional venture capital (VC) and startup scene.
ALSO READ: Malaysia’s KWAP aims to boost domestic VC activity with new fund
Dana Perintis has committed to invest up to RM500 million over the next 18 to 24 months in startups. Over time, KWAP will launch similar programs, Dana Parentis II and III.
“Beyond the Dana Perintis, we also hope to address and boost Malaysia’s private equity space, the later stage in private markets. We hope to do something in the next few years to address a wider spectrum of the domestic private markets ecosystem,” Hazman said.
Beyond Malaysia, KWAP is also looking at opportunities in the surrounding Southeast Asia markets.
ALSO READ: KWAP plans to lift SE Asia allocations