PETALING JAYA: Tan Sri Azman Mokhtar, who had helmed Khazanah Nasional Bhd for more than a decade, has said that aside from the controversial RM80mil losses in an online lingerie venture and the loss of its RM1.7bil stake in UBS, Khazanah has garnered more than a RM6bil gain from a single investment in e-commerce giant Alibaba.
“In fact, these gains alone are funding a multitude of technology investments including in Zivame, the online lingerie firm based in India,” he said.
During his tenure, he pointed out that Khazanah’s assets had trebled to RM115.6bil as of the end of last year, from a modest RM33bil in May 2004.
The RM82.3bil increase in net worth adjusted would translate into a compounded annual growth rate of 9.6% per annum over that period.
“This was achieved with an appropriate level of portfolio risk of an asset cover of more than three times,” Azman said.
Azman pointed out that between 2008 and 2017, Khazanah had actually made a RM100bil gain, with the top-ten gainers making up some RM92bil and the ten largest losses totalling up to about RM19bil, namely, Malaysia Airlines Bhd with about RM8.4bil, SilTerra Malaysia Sdn Bhd with RM5.5bil and Olivant coming in third with RM1.7bil.
“In investment terms, it means our gains have outnumbered our losses by a factor of 5:1. In footballing terms, it’s like winning a game 5-1!” he said.
“The correct way to evaluate an investment portfolio is, of course, to evaluate the portfolio performance on a risk-adjusted basis rather than merely individual investment cases,” he added.
Azman’s letter came two days after he stepped down as the head of the government’s investment arm, a position he had held for more than 14 years.
Last week, the old board of directors at Khazanah, including Azman, resigned en bloc. All nine directors gave their undated resignation letters last Tuesday.
Since the offer to resign by the board was revealed, several investments by Khazanah in the past have been questioned, namely, Zivame and UBS.
On its investment in Zivame, Azman explained that the investment was made last December when Khazanah invested some RM80mil for a 22% stake in it.
He believes Khazanah can recover all its investment in the online lingerie firm based in India over the medium term.
“We decided to prudentially provide in full in our 2017 accounts as a conservative measure as we sometimes do for technology investments.
“Zivame remains a going concern and in fact has just had its best ever quarter and we remain quietly confident that we would be able over the medium term to recover all or almost all of what we have provided for,” Azman said.
On Khazanah’s investment in UBS, he pointed out that the investment was made through private equity firm Olivant and the losses were “indeed large”.
“The losses incurred were RM1.7bil and not RM3bil as widely reported.
“At all times, proper provisioning and recognition of the losses were made in line with accounting and prudential standards. At one point, 97% provisioning was made of the RM3.6bil total investments.
“Through diligent recovery work, more than half or 53.5% of the value of the investments or RM1.9bil has been recovered,” he explained.
The losses resulted from the negligence and breach of the shareholders’ agreement by the fund managers, Olivant, which the firm had admitted to, apologised and assumed responsibility for, Azman added.
He said that an internal review by independent board members with input from KPMG found that the case was clear of wrongdoing and investment processes and board approvals were complied with.
Before he ended the letter, his parting words were: “In our world as we discharge our mandate at Khazanah, it is at one level about investments and cashflows, about allocation of financial resources, deployment of people, assigning roles, refereeing disputes, about due diligence and estimating valuation to pay for a company, and about measurement of risk, among others.
“This may well be so, and is technical in nature, but these decisions big and small are ultimately about putting the right things in the right place at the right time – the very definition of what is just and fair in itself.”