Politics help fuel CEO turnover at Malaysia state funds

Experts say the recent changes of chief executives at state investment funds PNB, EPF and Kwap all have similar explanations, with Khazanah potentially being next.
Politics help fuel CEO turnover at Malaysia state funds

Could Khazanah Nasional’s chief executive become the latest to lose his position at a top Malaysian asset owner?

Speculation is mounting that Shahril Ridza Ridzuan will not have his three-year term renewed when it expires in August, after the $31 billion sovereign wealth fund unveiled disappointing 2020 financial results on March 4.

If he does fail to retain his position, he would be the latest CEO to leave one of Malaysia’s leading government-linked investment companies (GLICs), amid a remarkable period of turnover.

Back in June 2020 Permodalan Nasional Berhad (PNB) CEO Jalil Rasheed announced his surprise resignation from the government-link fund management house, less than nine months into the job.

Then in October last year, civil service pension fund Kwap did not renew CEO Syed Hamadah Othman’s two-year contract, instead replacing him with armed forces pension fund LTAT CEO Amlizan Mohamed. Kwap chief investment officer (CIO) Azmeen Adnan, who had also been appointed under the previous administration in 2018, did not see his contract extended either.

Most recently, in February the Employees Provident Fund (EPF) announced that CEO Alizakari Alias was departing, despite the private pension fund have recorded a stable 2020 performance. Amir Hamzah, state electricity company Tenaga Nasional's CEO, replaced him just weeks later.

Experts familiar with the investors and Malaysian government blame two factors for the mass turnover of asset owner leaders: politics and performance.

A former senior executive of a Malaysia GLIC told AsianInvestor that structural concerns lie close to the heart of many state-linked asset owners. The most obvious is a tendency among management to appease the government of the day, even if its oversight preferences do not align with investment best practice.  

“I think this is the failure of the government for not institutionalising institutions,” he said on background. “Currently, you are at the mercy of who is in charge [in government].”

He added that the boards of some GLICs enjoy a “false notion” of authority, with their leaders often unwilling to oppose government wishes over fears that doing so would damage their professional career prospects. This is in large part because Malaysia’s government often moves favoured senior executives of GLICs and government-linked companies into other organisations.

This was the case for Shahril, who joined Khazanah from EPF in 2018, and Hamzah, who joined EPF from state electricity company Tenaga Nasional (which is majority owned by Khazanah).


However, the uncertainty surrounding Shahril’s future at Khazanah appears to be down primarily to its performance during 2020.

The SWF reported on March 4 that its overall profits dropped 61% to RM2.9 billion ($715 million), dragged down by poor performance of Malaysian domestic equities. That led the asset value of its strategic fund, which holds assets deemed to bring long-term economic benefit to the country, to fall 15% to RM27.9 billion in 2020.

This was a particularly poor return, given the time weighted return of 8.3% it had reported for 2019. It also fared badly against the few other SWFs to report recent earnings. Australia’s Future Fund, for example, reported a year-on-year drop of 1.8% as of September 2020.

Ex-EPF CEO Alizakri Alias

The departure of Alias from EPF, where he had been CEO since August 2018, appears to have been more rooted in politics. People familiar with the pension fund said he was forced to resign before the end of his tenure due to disagreements with the government.

It was widely known that Alias was against the implementation of iSinar and iLestari hardship withdrawal schemes that allowed Malaysians to tap into their retirement savings to cope with Covid-19. Critics say the decision has left unit holders, who were already lacking sufficient savings for retirement, even worse off.

Alias has been open about his lack of employment prospects and tips for coping with anxiety since departing on LinkedIn. Observers say this is a quiet signal of his discontent with having had to leave EPF.

EPF did not respond to AsianInvestor’s request for comment.

Jalil Rasheed,
former CEO of PNB

Rasheed’s earlier departure in mid-June was also controversial, with the former CEO citing anonymous online harassment as a major reason.

It is understood that Rasheed also had disagreements with the new administration following the 2020 political turmoil that saw the replacement of prime minister Mahathir Mohamad by Muhyiddin Yassin. Sources familiar with PNB say the former CEO sought to introduce a culture of transparency and accountability within the fund but that the new administration wanted to increase its control of PNB, including installing allies as board members.

While the $75 billion PNB continues to have an independent board of directors, it is owned by the Yayasan Pelaburan Bumiputera foundation, which in turn is chaired by prime minister Yassin. The government does not have an having an official say in CEO hires or important fund decisions, but there is a “cultural tendency” to check with the premiership before confirming new appointments, a former employee said.

Meanwhile, the timing of the CEO and CIO changes at Kwap – so close to respective government changes in 2018 and 2020 – also suggests an apparent preference by new administrations to have preferred senior executives.

PNB did not respond to requests for comment, while a Kwap spokeswoman declined to comment.  


Shahril Ridza Ridzuan: 
uncertain future at Khazanah

The fate of Shahril could offer clarity about the extent to which Malaysia’s latest government wants to continue installing favoured executives into leadership positions.  

While Khazanah’s 2020 earnings were undeniably disappointing, managing director of Global SWF Diego Lopez does not think Shahril’s decisions are to blame.

“The Malaysian economy has been especially affected by Covid-19 and the oil price decline,” he said.

He added that the sovereign wealth fund had the misfortune of being particularly vulnerable, given that it is heavily exposed to aviation and tourism assets, such as Malaysia Airlines parent company Malaysia Aviation Group. 

Shahril also boasts many years of asset owner experience under multiple administrations. He has worked as CEO or deputy CEO of GLICs underneath former premier Abdullah Badawi (who served as prime minister between 2003 and 2009), Najib Razak (2009-2018), Mahathir Mohamad (2018-2020) and now Muhyiddin Yassin.

However, this long track record may not be enough to prevent him from being replaced in his position, following the latest results. Malaysian and international media are speculating that Jeffri Salim Davidson, the chief of the Sime Darby conglomerate, will be named as the next Khazanah CEO.

AsianInvestor recently reported on the upcoming change of leadership at Singapore’s Temasek.

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