PETALING JAYA: Kumpulan Wang Persaraan (KWAP) has allocated RM300mil to invest in small-cap and medium-cap companies on Bursa Malaysia and has already identified 30 such companies, its new chief executive officer Wan Kamaruzaman Wan Ahmad said.
Sources said the small caps that KWAP is close to investing in includes MyEG Services Bhd, a star performer among small caps, having risen by some 146% to RM1.94 year-to-date.
While declining to comment on specific investments, Kamaruzaman, who took the helm of KWAP in May, said going into small caps was part of the strategy to diversify the portfolio base of KWAP and to gain exposure to growth companies that hold potential.
He said the fund was always on the lookout to invest in small-cap stocks and that it had already invested in a number of small-sized companies from the 30 companies in its universe.
A fund manager told StarBiz that at the moment there were activities by institutional funds investing in small-cap stocks, but “not in a big way”.
“The main risk in investing in small caps is that it requires intensive research, but if you manage to find a good one, the upside potential is very good,” the fund manager said.
Small caps are generally classified as companies with market capitalisation of RM750mil, while mid caps have market capitalisation of between RM750mil and RM2bil, the fund manager said.
However, a bigger diversification strategy that Kamaruzaman has embarked on is property investments abroad.
KWAP has allocated about 3% of its funds for international property investment.
“Real estate investment fits our strategy and create a long-term recurring income,” he said, adding that the fund was also looking to invest in the local property market.
“What we are trying to focus right now is to allocate our assets to be more sustainable and looking at a long-term strategy to beef up our investment portfolio,” he said.
Last year, the pension fund has made its first real estate investment in the United Kingdom (UK) and owned two properties there. It also has two properties in Australia, namely in Brisbane and Melbourne.
“We are doing due diligence work on our property investment in Melbourne,” he said.
It was previously reported that the Government had recently approved KWAP’s request for higher international allocation – from 10% to 19% of its total fund size.
“Our total investment abroad currently accounts for about 9% (or RM8.82bil) of our total assets,” he said.
Kamaruzaman said small caps would have to adhere to a number of strict criteria before any investment decision was made and it could be included into the stock universe. He said this included having a certain amount of liquidity in the stock as well as a certain size in terms of its market capitalisation.
KWAP currently holds RM98bil of assets, of which 55% are invested in fixed income, 35% in the stock market and 10% in property, private equity and infrastructure.
Taking its focus to another level, he said the fund was looking for the possibility to expand its small-cap investment via its outsourcing programme.
“Only then will our investment size for small-cap and mid-cap stocks be bigger,” he added.
It was learn that the retirement fund was targeting to close the year with RM100bil of assets from RM98bil assets to-date.
KWAP was established in March 2007 to manage retirement funds contribution from the federal government, statutory bodies, local authorities and other agencies.