KUALA LUMPUR, Nov 29 — Khazanah Nasional Bhd says a recent news report on its financial performance headlined “Khazanah Feels The Heat Amid Push To Change Its Investment Strategy”, and subsequently covered by the other media and social media outlets, was inaccurate and ultimately gave a misleading picture of the fund’s financial performance.
“This is principally due to its selective focus on a narrow and incomplete set of indicators of financial performance,” it said in a statement today.
As has been widely reported, the most representative measure of Khazanah’s financial performance is to refer to total returns that take into account realised and unrealised returns, as well as, distribution of returns through dividends.
The report, among others, claimed that the net worth adjusted (NWA) of Khazanah had dipped since 2014 from RM111 billion to RM102 billion.
Explaining further, Khazanah said its total return was represented by the growth in the net value of its portfolio, that is its NWA.
“As previously reported, the NWA value of the portfolio grew 3.1 times or 207 per cent to RM102.1 billion in December 2016 from RM33.3 billion in May 2004, reflecting the period since the start of the revamp of Khazanah and government-linked companies (GLCs).
“This translated into an annual compounded return of 9.3 per cent per annum over the 13-year period, rather than just the one per cent or 2.6 per cent return as was implied by the articles.
“In addition, Khazanah’s audited shareholders funds had grown to RM37.8 billion, as at Dec 31, 2016, from RM13.2 billion, as at Dec 31, 2004, an increase of RM24.6 billion over the period,” it said.
In highlighting some of the salient aspects of the portfolio and the mandate as a strategic investment fund, Khazanah said the rate of total return as represented by NWA growth was in line with relevant benchmarks, in particular, with the FBM KLCI which posted a total shareholder return of 9.4 per cent per annum during the same period.
Khazanah also had a multi-pronged mandate that included investing for growth and commercial returns – domestically and internationally – while also undertaking developmental and national initiatives. The latter include the development of regional economic corridors, reforms of the education sector and the restructuring and catalysing of various economic sectors and national companies.
The range of returns of these initiatives vary widely from low or even negative returns for more developmental activities, to significantly higher returns for our commercial and international operations, averaging at the said 9.3 per cent per annum NWA return.
“Given that Khazanah’s mandate does not involve receiving any regular capital injections, and its need to reinvest for growth and national initiatives, the bulk of its returns are primarily channeled into reinvestments rather than to dividends.
“This need for a balanced re-investment strategy for growth, development and dividends is done in consultation and approval of the board of directors and the government,” it added.
The statement also said as Khazanah did not receive regular capital injections unlike most sovereign and sovereign-linked funds, it needed to ensure that its returns were achieved with an appropriate level of risk undertaken.
“A principal risk management measure in this regard is our asset cover (which measures assets over liabilities), which stands at 2.9x, as at Dec 31, 2016.
“We should also record that Khazanah actively tracks other non-financial measures of performance including economic, strategic and societal indicators. For those interested, these measures are widely reported in our annual reports and on our website (www.khazanah.com.my).”
“We hope the above clarifies the conclusions of the articles in respect of Khazanah’s financial and non-financial performance.
“Finally, with regard to Khazanah’s leadership succession as referred to in the articles, we wish to reiterate that Khazanah has a well-established and orderly succession process, approved by our board of directors that is in line with good institutional practice,” it added. — Bernama