Malaysia’s KWAP to double global sukuk holdings to US$200m

KUALA LUMPUR, Aug 30 — Kumpulan Wang Persaraan (Diperbadankan), Malaysia’s second-biggest state pension fund, will double its holdings of global Islamic bonds as it chases better returns.

The retirement-savings vehicle, also known as KWAP, will increase the size of a US$100 million (RM330 million) sukuk fund that it started in 2011, said Chief Executive Officer Wan Kamaruzaman Wan Ahmad. KWAP, which oversees RM91 billion, uses external companies to manage the global Shariah holdings

“We plan to outsource another US$100 million and have sent out requests for proposals to select new managers,” Wan Kamaruzaman said in an interview in Kuala Lumpur yesterday. “We are doing so because the returns from sukuk are reasonable and the recent correction gives us the opportunity to enter the market at better levels.”

The average yield on global bonds that comply with Islam’s ban on interest climbed 35 basis points, or 0.35 percentage point, to 4.12 per cent this month after reaching a record low of 2.67 per cent on January 10, according to the HSBC/Nasdaq Dubai US Dollar Sukuk Index. Global Shariah-compliant debt posted a loss of 2.1 per cent in 2013, the gauge shows, while emerging-market securities dropped 9.8 per cent, according to JPMorgan Chase & Co.’s EMBI Global Index.

KWAP plans to increase its holdings of international sukuk further in the future as part of a strategy to diversify its portfolio and increase its overseas investments, Wan Kamaruzaman said. Foreign holdings account for 6.2 per cent of the fund’s assets and government debt makes up 24 per cent of its portfolio, according to data published on its website. — Blommberg

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