PNB to intensify diversification efforts

President and group chief executive officer Ahmad Zulqarnain Onn (pic) says PNB’s international assets have generated a much larger contribution to the fund’s return of 30% in 2021 compared to 24.2% last year.

Permodalan Nasional Bhd (PNB) is preparing a strategy that will expand its ambitions to become a global fund that invests in various asset classes from fixed income and equities to private equity, commercial and residential assets.

PNB is the country’s largest fund management company with RM338bil in assets under management (AUM). It has been expanding its investment in areas such as logistics and data centres.

In the past, PNB was known for its “over-concentrated” investments that were mainly in the local stock market, and the fund only started to diversify overseas in 2018.

To date, its overseas investment constitutes 16% of its portfolio, while the remaining 84% is invested in the local market.

In 2017 it only had 2% of its funds invested abroad, with 98% in the local capital market, specifically, the stock market.

President and group chief executive officer Ahmad Zulqarnain Onn says PNB’s international assets have generated a much larger contribution to the fund’s return of 30% in 2021 compared to 24.2% last year.

“The stronger performance of our global equity investments has managed to cushion the impact of the challenging domestic market.

“This exemplifies the importance of a well-diversified portfolio in managing portfolio risks and delivering sustainable returns,” he said, after the virtual announcement of Amanah Saham Bumiputera’s (ASB) 2021 dividend on Thursday. The diversification has boosted PNB’s performance.

PNB reported a 5.6% growth in its AUM to RM338bil in 2021 compared with RM320.4bil last year. The fund declared a five sen dividend income of RM8.9bil for its flagship fund ASB for financial year 2021.

This is in contrast to the main FBM KLCI of the local stock market, which is the worst-performing index in the region this year, declining by more than 7% year-to-date.

The dividend comprises an income distribution of 4.25 sen per unit and a bonus of 0.75 sen per unit.

Last year, PNB declared a dividend of 4.25 sen per unit for ASB unitholders due to market weakness caused by the Covid-19 pandemic uncertainties.

PNB said the income distribution will benefit 10.4 million ASB unitholders.

This brings the fund’s total cumulative income distribution and bonus to RM168.5bil since it was first introduced in 1990.

Ahmad Zulqarnain points out that its local investments have been contributing positively to the fund’s return despite the weak index performance.

He says PNB’s “strategic investment companies” in Malaysia had declared RM5bil in total dividends, which was 35% more than the RM3.8bil declared in 2020.

“One of the key contributors to the growth is from our investment in the banking sector,” he adds.

The strategic companies for PNB are Malayan Banking Bhd, Sime Darby Bhd, Sime Darby Plantations, Sime Darby Property Bhd, S P Setia Bhd, Duopharma Biotech Bhd, UMW Holdings Bhd, Velesto Energy Bhd and MNRB Holdings Bhd.

It is worth noting that PNB has participated in several major corporate exercises over the last few years which were aimed at restructuring some of its strategic companies and improving their corporate governance.

This includes the demerger exercise of Sime Darby Bhd into three separate listed companies, UMW Holdings Bhd from UMW Oil & Gas Corp Bhd, and the decoupling of Chemical Company of Malaysia Bhd (CCM) and CCM Duopharma Biotech Bhd.

There was also a major acquisition of I&P Bhd by S P Setia Bhd to create one of the country’s largest property companies.

ESG priorities

Ahmad Zulqarnain stresses that despite the fund’s diversification efforts into overseas markets, investing in the domestic capital markets remains a priority for PNB and it will continue to look for investment opportunities here.

The domestic capital market comprises 68% of its investment portfolio.

“We are not moving away from Malaysia. We will continue to deploy capital into Malaysian companies via initial public offerings, subscription to sukuk, investment into real estate and private companies.

“For us it is about constructing the right ‘all weather’ portfolio with the right asset allocation to generate the sustainable returns that are required,” he adds.

Ahmad Zulqarnain says PNB will be focusing on highlighting environmental, social and governance factors in its investment activities.

He says the fund was planning to launch its “sustainability framework” by the first quarter of next year.

“We have defined our sustainability aspirations across three pillars.

“On the environment, there will be great focus on transitioning both PNB and its portfolio companies towards lowering greenhouse gas emissions and meeting Malaysia’s net-zero carbon emission by 2050.

“On social and governance, we will be making commitments on improving sound governance practices that we believe are right for this market and also reducing inequality and improving diversity,” he says.

Since his appointment in July last year, Ahmad Zulqarnain, who hailed from Khazanah Nasional Bhd, has been planning the fund’s sustainability roadmap.

He succeeded Jalil Rasheed, who relinquished his position after nine months into the job.

“With the organisational transformation initiatives implemented during the year, PNB is now more agile and well-equipped to realise greater potential moving forward,” Ahmad Zulqarnain quips.

When asked if PNB is looking to invest further in Sapura Energy should the oil and gas company plan a cash call, Ahmad Zulqarnain says “we will evaluate it just like any other investments”.

PNB emerged as the largest shareholder of ailing Sapura Energy in 2018 after it took up the unsubscribed rights shares in the company’s cash call then, with a RM4bil investment, raising its stake to 40% from 12.6%.

Shares in Sapura Energy are currently trading at an all-time low of 4.5 sen per share.

Sapura Energy, which is currently facing cash flow issues and sitting on a debt level of RM10bil, would clearly put PNB in a tough spot were there to be a fresh cash call.

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