Malaysia’s KWAP to raise its overseas allocation

20 February 2017   Category: News, Asia, Australia, Global, Malaysia, Europe, France, United Kingdom, Germany   By Asia Asset Management

Kumpulan Wang Persaraan (KWAP), the second largest pension fund in Malaysia, is looking to raise its overseas asset allocation to 19% in 2020, up from the current 11.6%, in a bid to seek more stable returns.

According to the News Straits Times, Wan Kamaruzaman Wan Ahmad, chief executive officer of KWAP, stated that the pension’s investments in fixed income, bonds and Malaysian Government Securities (MGS), delivered a below-par ten-year return of 4%, underperforming its target of over 5%. This, coupled with its equity returns generating negative returns for three consecutive years, has sped up the pension’s decision to enlarge its offshore position.

Mr. Wan Kamaruzaman explained that KWAP currently has approximately 129.9 billion ringgit (US$29.96 billion) in total AUM, with 11.6% allocated towards overseas investments.

Property is one of the major asset classes that KWAP has looked into, in the course of increasing its overseas investments. 

Mr. Wan Kamaruzaman revealed that the pension is currently seeking out investment opportunities in continental Europe, particularly in Germany and France.

At the start of 2015, the Malaysian government instructed government-linked investment companies, including the Employee Provident Fund and KWAP to postpone further investments abroad, in an effort to provide support for the tumbling ringgit, according to the publication P&I

However, Mr. Wan Kamaruzaman downplayed the impact of that directive, saying: “The instruction did not involve foreign exchange. We’re using loans and increasing our investments overseas by utilising our existing asset that does not involve forex.” 

In terms of asset outsourcing, KWAP currently outsources 15% of its total assets to external fund managers: “We have ten different mandates for external managers of around 17 billion ringgit,” he added.

According to KWAP’s latest financial results, the pension recorded a gross investment income of 4.61 billion ringgit in the fiscal year ended September 30, 2016, with equity as the largest contributor at 1.67 billion ringgit. This was followed by fixed income at 1.29 billion ringgit, and 470 million ringgit from alterative investments. ​